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OFFERING MEMORANDUM STRICTLY CONFIDENTIAL THE PROVINCE OF BUENOS AIRES (A Province of Argentina) USD 500,000,000 5.750% Notes Due 2019 USD 500,000,000 7.875% Notes Due 2027 ___________________ The Province of Buenos Aires (the “Province”) is offering USD 500,000,000 aggregate principal amount of its 5.750% Notes due 2019 (the “2019 Notes”). The Province is also offering USD 500,000,000 aggregate principal amount of its 7.875% Notes due 2027 (the “2027 Notes and, together with the 2019 Notes, the “Notes”). The Province will pay interest on the Notes on June 15 and December 15 of each year, beginning on December 15, 2016. The 2019 Notes will mature on June 15, 2019 and the 2027 Notes will mature on June 15, 2027. The Province will pay the principal of (i) the 2019 Notes on June 15, 2019 and (ii) the 2027 Notes in three installments: 33.33% on June 15, 2025, 33.33% on June 15, 2026 and 33.34% on June 15, 2027. The Notes will be direct, general, unconditional and unsubordinated Public External Indebtedness (as defined below) of the Province, ranking without any preference among themselves and equally with all other unsubordinated Public External Indebtedness of the Province. It is understood that this provision shall not be construed so as to require the Province to make payments under the Notes ratably with payments being made under any other Public External Indebtedness of the Province. Application will be made to list the Notes on the Luxembourg Stock Exchange, and to have the Notes admitted to trading on the Euro MTF Market of the Luxembourg Stock Exchange, and the Province will apply to list the Notes on the Mercado de Valores de Buenos Aires S.A.(“MERVAL”) and the Argentine Mercado Abierto Electrónico S.A. (“MAE”). Investing in the Notes involves risks that are described in the “Risk Factors” section beginning on page 8 of this offering memorandum. The Notes will contain provisions, commonly known as “collective action clauses.” Under these provisions, which differ from the terms of our public external indebtedness issued prior to June 9, 2015, we may amend the payment provisions of any series of debt securities issued under the indenture (including the Notes) and other reserved matters listed in the indenture with the consent of the holders of: (1) with respect to a single series of debt securities, more than 75% of the aggregate principal amount of the outstanding debt securities of such series; (2) with respect to two or more series of debt securities, if certain “uniformly applicable” requirements are met, more than 75% of the aggregate principal amount of the outstanding debt securities of all series affected by the proposed modification, taken in the aggregate; or (3) with respect to two or more series of debt securities, more than 66 2/3% of the aggregate principal amount of the outstanding debt securities of all series affected by the proposed modification, taken in the aggregate, and more than 50% of the aggregate principal amount of the outstanding debt securities of each series affected by the proposed modification, taken individually. See “Description of the Notes—Meetings, Amendments and Waivers.” ___________________ Price to investors for the 2019 Notes: 100.000% plus accrued interest, if any, from June 15, 2016 Price to investors for the 2027 Notes: 100.000% plus accrued interest, if any, from June 15, 2016 ___________________ The Notes have not been, and will not be, registered under the Securities Act or the securities laws of any other jurisdiction. Unless they are registered, the Notes may be offered only in transactions that are exempt from registration under the Securities Act or the securities law of any other jurisdiction. Accordingly, the Notes are being offered only to Qualified Institutional Buyers (“QIBs”) pursuant to Rule 144A under the Securities Act and persons outside the United States in reliance on Regulation S of the Securities Act. For further details about eligible offerees and resale restrictions, see “Notice to Investors.” The Province will issue the Notes in fully registered form, without interest coupons attached, only in denominations of USD 150,000 and in integral multiples of USD 1,000 in excess thereof. The Notes will be registered in global form in the name of a nominee of a common depositary for Euroclear Bank S.A./N.V., as operator of the Euroclear System (“Euroclear”) and Clearstream Banking, société anonyme (“Clearstream”). See “Description of the Notes—Registration and Book-Entry System.” ___________________ Joint Bookrunners Citigroup HSBC Local Co-Manager Banco de la Provincia de Buenos Aires ___________________ The date of this offering memorandum is June 8, 2016. Santander TABLE OF CONTENTS Page Enforcement of Civil Liabilities .................................................................................................................................. iii Defined Terms and Conventions ..................................................................................................................................iv Presentation of Financial and Other Information....................................................................................................... viii Forward-Looking Statements .................................................................................................................................... viii Summary........................................................................................................................................................................1 Risk Factors ...................................................................................................................................................................8 Use of Proceeds ........................................................................................................................................................... 22 The Province of Buenos Aires ..................................................................................................................................... 23 The Provincial Economy ............................................................................................................................................. 27 Public Sector Finances................................................................................................................................................. 46 Public Sector Debt ....................................................................................................................................................... 67 Banco Provincia........................................................................................................................................................... 92 Description of the Notes ............................................................................................................................................ 101 Notice to Investors ..................................................................................................................................................... 115 Taxation ..................................................................................................................................................................... 119 Plan of Distribution ................................................................................................................................................... 125 Official Statements .................................................................................................................................................... 128 Validity of the Notes.................................................................................................................................................. 128 General Information .................................................................................................................................................. 128 You should rely only on the information contained in this offering memorandum. The Province has not, and the initial purchasers have not, authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. The Province is not, and the initial purchasers are not, making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this offering memorandum is accurate only as of the date on the front cover of this offering memorandum and may have changed since that date. The Province is relying on an exemption from registration under the Securities Act for offers and sales of securities that do not involve a public offering. By purchasing Notes, you will be deemed to have made the acknowledgements, representations, warranties and agreements described under the section “Notice to Investors” in this offering memorandum. You should understand that you will be required to bear the financial risks of your investment for an indefinite period of time. Neither the delivery of this offering memorandum nor any sale made hereunder will under any circumstances imply that the information herein is correct as of any date subsequent to the date of the cover of this offering memorandum. This offering memorandum may only be used for the purposes for which it has been published. This offering memorandum may not be copied or reproduced in whole or in part. It may be distributed and its contents disclosed only to the prospective investors to whom it is provided. By accepting delivery of this offering memorandum, you agree to these restrictions. See “Notice to Investors.” This offering memorandum is based on information provided by the Province and other sources that the Province believes are reliable. The Province cannot assure you that this information is accurate or complete. This offering memorandum summarizes certain documents and other information and the Province refers you to them for a more complete understanding of what the Province discusses in this offering memorandum. In making an investment decision, you must rely on your own examination of the Province and the terms of the offering and the Notes, including the merits and risks involved. i After having made all reasonable inquires, the Province confirms that it accepts responsibility for the information it has provided in this offering memorandum and assumes responsibility for the correct reproduction of the information contained herein. The Province and the initial purchasers are not making any representation to any purchaser of Notes regarding the legality of an investment in the Notes by such purchaser under any legal investment or similar laws or regulations. You should not consider any information in this offering memorandum to be legal, business or tax advice. You should consult your own attorney, business advisor and tax advisor for legal, business and tax advice regarding an investment in the Notes. You should contact the initial purchasers with any questions about this offering or for additional information to verify the information contained in this offering memorandum. None of the United States Securities and Exchange Commission, any state securities commission or any other regulatory authority has approved or disapproved of the securities or passed upon or endorsed the merits of this offering or the adequacy or accuracy of this offering memorandum. Any representation to the contrary is a criminal offense. In connection with the issue of the Notes, the initial purchasers (or persons acting on behalf of the initial purchasers) may over-allot Notes or effect transactions with a view to supporting the market price of the Notes at a level higher than that which might otherwise prevail. However, there is no assurance that the initial purchasers (or persons acting on their behalf) will undertake stabilization action. Any stabilization action may begin on or after the date on which adequate public disclosure of the terms of the offer of the relevant Notes is made and, if begun, may be ended at any time, but it must end no later than 30 days after the date on which we received the proceeds of the issue, or no later than 60 days after the date of allotment of the relevant Notes, whichever is the earlier. Any stabilization action will be undertaken in accordance with applicable laws and regulations. ii ENFORCEMENT OF CIVIL LIABILITIES The Province is a political subdivision of a sovereign state. Consequently, it may be difficult for investors or a trustee to obtain, or realize in the United States or elsewhere upon, judgments against the Province. To the fullest extent permitted by applicable law, the Province will irrevocably submit to the non-exclusive jurisdiction of any New York state or U.S. federal court sitting in the City of New York, Borough of Manhattan, and any appellate court thereof, in any suit, action or proceeding arising out of or relating to the Notes or the Province’s failure or alleged failure to perform any obligations under the Notes, and the Province will irrevocably agree that all claims in respect of any such suit, action or proceeding may be heard and determined in such New York state or U.S. federal court. The Province will irrevocably waive, to the fullest extent it may effectively do so, the defense of an inconvenient forum to the maintenance of any suit, action or proceeding and any objection to any proceeding whether on the grounds of venue, residence or domicile. To the extent that the Province has or hereafter may acquire any sovereign or other immunity from jurisdiction of such courts (whether through service of notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise), the Province will, to the fullest extent permitted under applicable law, including the U.S. Foreign Sovereign Immunities Act of 1976 (the “Foreign Sovereign Immunities Act”), irrevocably waive such immunity in respect of any such suit, action or proceeding. However, under the Foreign Sovereign Immunities Act, it may not be possible to enforce in the United States a U.S. judgment against the Province. In addition, under the laws of Argentina, it may not be possible to obtain in Argentina recognition or enforcement of a U.S. Judgment and any attachment or other form of execution (before or after judgment) on the property and revenues of the Province will be subject to the applicable provisions of the Código Procesal Civil y Comercial de la Nación Argentina, or the “Code of Civil and Commercial Procedure of Argentina.” See “Description of the Notes—Governing Law” and “—Submission to Jurisdiction.” A judgment obtained against the Province in a foreign court may be enforced in the Supreme Court of Argentina. Based on existing law, the Supreme Court of Argentina will enforce such a judgment in accordance with the terms and conditions of the treaties entered into between Argentina and the country in which the judgment was issued. In the event there are no such treaties, the Supreme Court of Argentina will enforce the judgment if it: • complies with all formalities required for the enforceability thereof under the laws of the country in which it was issued; • has been translated into Spanish, together with all related documents, and it satisfies the authentication requirements of the laws of Argentina; • was issued by a competent court, according to Argentine principles of international law, as a consequence of a personal action (action in personam) or a real action (action in rem) over a movable property if it has been moved to Argentina during or after the time the trial was held before a foreign court; • was issued after serving due notice and giving an opportunity to the defendant to present its case; • is not subject to further appeal; • is not against Argentine public policy; and • is not incompatible with another judgment previously or simultaneously issued by an Argentine Court. In a March 2014 decision, the Supreme Court of Argentina held that the enforcement of a foreign judgment did not satisfy one of the requirements set forth in the Code of Civil and Commercial Procedure of Argentina (i.e., that a foreign judgment cannot contravene Argentine law principles of public policy), given the fact that an enforcement as such requested by the plaintiff would imply that such plaintiff, pursuant to an individual action filed before a foreign court, would circumvent the public debt restructuring process set forth by the federal government through emergency legislation enacted in accordance with the Argentine Constitution. In addition, the Supreme Court of Argentina held that such norms were part of Argentine public policy and, therefore, that the enforcement of a foreign judgment, as the one sought by the plaintiff, could not be granted as it would be clearly contrary to such legislation. iii Attachment prior to judgment or attachment in aid of execution will not be ordered by courts of Argentina or the Province with respect to public property if such property is located in Argentina and is included within the provisions of Articles 234 and 235 of the Argentine Civil and Commercial Code or directly provides an essential public service. DEFINED TERMS AND CONVENTIONS Certain Defined Terms All references in this offering memorandum to: The “Province,” “we,” “our” and “us” are to the Province of Buenos Aires, the issuer; “Banco Provincia” are to Banco de la Provincia de Buenos Aires, the Bank of the Province of Buenos Aires; The “Central Bank” are to the Banco Central de la República Argentina, the Central Bank of the Republic of Argentina; “INDEC” are to the Instituto Nacional de Estadística y Censos, the National Institute of Statistics and Censuses; “ANSeS” are to the Administración Nacional de la Seguridad Social, the National Social Security Administration; “City of Buenos Aires” are to the Ciudad Autónoma de Buenos Aires, the Autonomous City of Buenos Aires; “Argentina” are to the Republic of Argentina; and The “federal government” are to the non-financial sector of the central government of Argentina, excluding the Central Bank. The terms set forth below have the following meanings for purposes of this offering memorandum: “BADLAR” is the weighted average interest rate paid by private banks in Argentina for deposits in Argentine Pesos on amounts greater than ARS 1.0 million for periods of 30-35 days. “Boden” were bonds that the federal government began to issue in 2002, originally to compensate individuals and financial institutions affected by emergency measures adopted by the federal government during the 2001 economic crisis. Subsequently, other Boden issued by the federal government and not related to the compensation of those affected by the 2001 crisis and related emergency measures. Currently, there are no Boden outstanding. “Bogar” are bonds issued by the federally administered Fondo Fiduciario para el Desarrollo Provincial (Trust Fund for Provincial Development) in order to restructure debt obligations of Argentina’s provinces, including the Province. The Province’s debt obligations in respect of Bogar bonds were consolidated with other provincial debts under the Programa Federal de Desendeudamiento de las Provincias Argentinas (Argentine Provincial Indebtedness Federal Refinancing Program). “CER,” or Coeficiente de Estabilización de Referencia, is a unit of account adopted on February 3, 2002, the value in pesos of which is indexed to consumer price index (the “CPI”). The nominal amount of a CER-based financial instrument is converted to a CER-adjusted amount, and interest on the financial instrument is calculated on the CER-adjusted balance. iv The “Conurbano Bonaerense” is an industrialized and heavily populated urban area surrounding the City of Buenos Aires. The scope and coverage of this area are defined by federal government agencies to represent a diverse demographic sample of Argentina’s urban population based upon various socio-economic variables, which are used in the development and implementation of national public policies. The area consists of several municipalities of the Province that surround the City of Buenos Aires and does not include the City of Buenos Aires. Approximately 63.5% of the Province’s population resides within the Conurbano Bonaerense. “Eurobonds” are bonds issued by the Province in the international capital markets since 1995, including securities issued under the Province’s USD 3.2 billion Euro Medium-Term Note program (EMTN Program) established in 1998. “Exchange Bonds” are the three series of bonds—Step-Up Long Term Par Bonds due 2035, Step-Up Medium Term Par Bonds due 2020, and Discount Bonds due 2017—issued by the Province pursuant to the restructuring exchange offer launched in November 2005 to holders of its then outstanding Eurobonds. Approximately 93.7% of the principal amount of the then outstanding Eurobonds were tendered and cancelled pursuant to the exchange offer, which expired in December 2005. The exchange offer closed in January 2006. Subsequently, the Province issued additional amounts of Step-Up Long Term Par Bonds in order to cancel a portion of the remaining outstanding Eurobonds, increasing the percentage of then-outstanding Eurobonds cancelled to 97.6%. “Exports” are calculated based upon statistics reported to Argentina’s customs agency upon departure of goods originated in the Province on a free-on-board (FOB) basis. The “Greater Buenos Aires” is a regional area within the Province, which includes the Conurbano Bonaerense and seven municipalities that surround the Conurbano Bonaerense. This definition is used for statistical purposes to refer to the largest urban area of the Province. “Gross domestic product,” or “GDP,” is a measure of the total value of final products and services produced in Argentina or the Province, as the case may be, in a specific year. The “inflation rate,” or “rate of inflation,” provides an aggregate measure of the rate of change in the prices of goods and services in the economy. The inflation rate is generally measured by the rate of change in the CPI between two periods unless otherwise specified. The annual percentage rate of change in the CPI as of a particular date is calculated by comparing the index as of that date against the index as of the date 12 months prior. The CPI in Argentina is calculated by INDEC. However, as a result of widespread concerns regarding the credibility of INDEC’s calculations during at least part of the period under analysis, we will present information on alternative measures of CPI inflation, using the CPI calculated by the INDEC, the CPI calculated by the government of the City of Buenos Aires and the CPI calculated by the Province of San Luis, the last two based on a weighted basket of consumer goods and services that reflects the pattern of consumption of households that reside in those jurisdictions. All references in this offering memorandum to CPI are to the INDEC CPI, the City of Buenos Aires CPI or the Province of San Luis CPI, as indicated therein. “Mercosur” refers to the Mercado Común del Sur, which is a regional trade agreement among Argentina, Brazil, Paraguay, Uruguay and Venezuela. The “primary balance” refers to the difference between the Province’s current and capital expenditures and current and capital revenues. The primary balance excludes interest expenses and borrowings and repayments of the Province’s debt. The “underemployment rate” represents the percentage of the Province’s labor force that has worked fewer than 35 hours during the week preceding the date of measurement and seeks to work more than that amount. The “labor force” refers to the sum of the population of the five main urban areas of the Province (Greater Buenos Aires, Bahía Blanca-Cerri, Greater La Plata, Mar del Plata-Batán and San Nicolás-Villa Constitución) that has worked a minimum of one hour with compensation or 15 hours without v compensation during the week preceding the date of measurement plus the population that is unemployed but actively seeking employment. The “unemployment rate” represents the percentage of the Province’s labor force that has not worked a minimum of one hour with compensation or 15 hours without compensation during the week preceding the date of measurement and is actively seeking employment. Currency of Presentation and Exchange Rates Unless otherwise specified, references in this offering memorandum to “dollars,” “U.S. dollars,” “USD” and “U.S.$” are to the currency of the United States of America, references to “euros” and “EUR” are to the currency of the European Union, references to “CHF” are to Swiss francs and references to “pesos” and “ARS” are to Argentine pesos. The Province publishes most of its economic indicators and other statistics in pesos. Since February 2002, the peso floats against other currencies, although the Central Bank purchases or sells U.S. dollars on the currency exchange market on a regular basis in order to minimize fluctuations in the value of the peso. After several years of variations in the nominal exchange rate, in 2012, there was a devaluation of approximately 14% of the peso against the U.S. dollar. This was followed by a further devaluation of the peso against the U.S. dollar that exceeded 30% in 2013 and 2014, including a fall of approximately 23% in January 2014. In 2015, there was a devaluation of approximately 52% of the peso against the U.S. dollar, including a 10% devaluation from January 1, 2015 to September 30, 2015 and a 38% devaluation in the last quarter of 2015, which was mainly experienced after December 16, 2015, following a significant economic reform implemented by the new administration. This devaluation reflected the decline in the value of the peso as a result of the active unofficial U.S. dollar trading market over the previous month (which reflected a peso/U.S. dollar exchange rate substantially different from the official peso/U.S. dollar exchange rate). See “Risk Factors—Risks Relating to the Province.” The following table sets forth the annual high, low, average and period-end “reference” exchange rates for the periods indicated, expressed in pesos per U.S. dollar and not adjusted for inflation. There can be no assurance that the peso will not depreciate or appreciate again in the future. The Federal Reserve Bank of New York does not report a noon buying rate for pesos. High Year ended December 31, 2010 .................................................................... 2011 .................................................................... 2012 .................................................................... 2013 .................................................................... 2014 .................................................................... 2015 .................................................................... 2016 January ........................................................... February ......................................................... March ............................................................. April ............................................................... May ................................................................ (1) (2) Source: Exchange rates(1) Low Average(2) Period end 3.986 4.304 4.917 6.518 8.556 13.763 3.794 3.972 4.305 4.923 6.543 8.554 3.913 4.130 4.551 5.479 8.119 9.269 3.976 4.303 4.917 6.518 8.552 13.005 13.941 15.584 15.919 14.779 14.262 13.069 14.088 14.246 14.140 13.963 13.655 14.815 14.961 14.410 14.138 13.904 15.584 14.582 14.258 14.013 Central Bank reference exchange rates (Communication A 3500 of Central Bank). Average of daily closing quotes. Central Bank. Currency conversions, including conversions of pesos into U.S. dollars, are included for the convenience of the reader only and should not be construed as a representation that the amounts in question have been, could have been or could be converted into any particular denomination, at any particular rate or at all. As of June 6, 2016 the peso-dollar reference exchange rate was ARS 13.7773 to USD 1.00. vi Exchange Controls Due to the deterioration of the Argentine economy and financial system in 2001, the inability of Argentina to service its public external debt and the decreased level of deposits in the financial system, the federal government issued Decree No. 1,570/2001 on December 3, 2001, which established certain monetary and currency exchange control measures, including restrictions on the free disposition of funds deposited in banks and restrictions on the transfer of funds abroad, subject to certain exceptions. In addition to the above measures, on February 8, 2002, the Central Bank made certain transfers of funds abroad to service principal and/or interest payments on foreign indebtedness subject to prior authorization of the Central Bank. Although some of the restrictions adopted by the Central Bank have been eliminated or reduced since 2003, some of them remain in force and additional foreign exchange regulations have been imposed. Following the recent Presidential elections in Argentina in October and November of 2015, in December 2015, the Central Bank issued Communication “A” 5850, as amended, which eliminated a significant portion of the foreign exchange restrictions imposed in 2012. See “Risk Factors—Risks Related to the Province—The recent Presidential elections and the change in the governing political party in Argentina may create certain uncertainties that could impact the Argentine and provincial economies and the securities market.” The primary changes related to the foreign exchange market that have been implemented after the recent presidential elections are: (i) the elimination of the requirement to mandatorily transfer and settle the proceeds from new foreign financial indebtedness incurred by the financial sector, the non-financial private sector and local governments through the Mercado Único y Libre de Cambios (Foreign Exchange Market, or “MULC”) (except that the evidence of the mandatory transfer and settlement of funds through the MULC will still be required for subsequent access to the MULC in order to repay principal and interest of such indebtedness, except in certain instances with respect to local government debt); (ii) the reduction of the mandatory minimum period that proceeds of any new financial indebtedness and renewal of existing indebtedness incurred by Argentine residents, held by foreign creditors and transferred through the MULC must remain in Argentina, from 365 calendar days to 120 calendar days from the date of the transfer of the relevant amount; (iii) in the case of partial or total prepayment of principal corresponding to foreign financial indebtedness, access to the MULC is permitted subject to the mandatory minimum period mentioned above; (iv) the ability of Argentine residents to purchase foreign currency in an amount up to USD 5.0 million per month to acquire offshore assets without specific allocation prior approval; (v) the reduction from 30% to 0% of a mandatory, non-transferable and non-interest bearing deposit of the amount of certain transactions involving foreign currency inflows for a 365 calendar day period; (vi) the elimination of the requirement of a minimum holding period (72 business hours) related to the purchase and sale of securities authorized to be listed or negotiated in different stock local and international exchange markets and (vii) the replacement of the Declaración Jurada Anticipada de Importación (Advance Sworn Import Declaration, or “DJAI”) with a new import procedure that requires certain filings and import licenses for certain goods (including textiles, footwear, toys, domestic appliances and automobile parts), which, unlike the previous system, does not require discretionary federal government approval of payments through the MULC for the import of products. vii PRESENTATION OF FINANCIAL AND OTHER INFORMATION All annual information presented in this offering memorandum is based upon January 1 to December 31 periods, unless otherwise indicated. Totals in some tables in this offering memorandum may differ from the sum of the individual items in those tables due to rounding. Unless otherwise stated, prices and figures are stated in current values of the currency presented. Certain statistical information included in this offering memorandum is preliminary in nature and reflects the most recent reliable data readily available to the Province as of the date of this offering memorandum. Information in this offering memorandum that is identified as being derived from a publication of Argentina, the Province or one of their respective agencies or instrumentalities relies on the authority of such publication as a public official document of Argentina or the Province, as the case may be. The Province has not independently verified the information in this offering memorandum that is identified as being derived from a publication of Argentina and makes no representation as to its accuracy or completeness. All other information and statements set forth herein relating to the Province are included as public official statements made on the authority of the Province. FORWARD-LOOKING STATEMENTS This offering memorandum and any related supplement (including any documents incorporated by reference) may contain forward-looking statements within the meaning of Section 27A of the Securities Act and section 21E of the U.S. Securities Exchange Act of 1934 as amended (the “Exchange Act”). Forward-looking statements are statements that are not historical facts, including statements about the Province’s beliefs and expectations. These statements are based on the Province’s current plans, estimates and projections. Therefore you should not place undue reliance on them. Forward-looking statements speak only as of the date they are made. The Province undertakes no obligation to update any of them in light of new information or future events. Forward-looking statements involve inherent risks and uncertainties, including, but not limited to, those set forth in “Risk Factors” in this offering memorandum. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. The information contained in this offering memorandum identifies important factors that could cause such differences. Such factors include, but are not limited to: • adverse domestic factors, such as increases in inflation, high domestic interest rates and exchange rate volatility, any of which could lead to lower economic growth; • adverse external factors, such as a decline in foreign investment, changes in international prices (including commodity prices) for goods produced within the Province, changes in international interest rates, recession or low economic growth in Argentina’s trading partners, which could decrease the value or quantity of exports from the Province, induce a contraction of the Province’s economy and, indirectly, reduce tax revenues and other public sector revenues and adversely affect the Province’s fiscal accounts; and • other adverse factors, such as climatic or political events, international or domestic hostilities and political uncertainty, including the effects of the results of the recent Argentine presidential, gubernatorial and legislative elections held in October and November 2015. viii SUMMARY This summary highlights selected economic and financial information about the Province and the Republic of Argentina. It is not complete and may not contain all of the information you should consider before purchasing the Notes. You should carefully read the entire offering memorandum, including “Risk Factors,” before purchasing the Notes. Selected Economic Information (in billions of Pesos unless otherwise indicated) 2010 2011 2012 2013 2014 153.45 168.99 174.85 180.91 181.59 2015 PROVINCIAL ECONOMY Real GDP (in billions of 1993 pesos) .............................. ------ Rate of change in Real GDP from prior year .................. 13.6% 10.1% 3.5% 3.5% 0.4% ------ Provincial GDP as a % of Federal GDP .......................... 36.4% 36.8% 37.4% ------ ------ ------ Inflation (as measured by INDEC CPI) ........................... 10.9% 9.5% 10.8% 10.9% 23.9% ------ Inflation (as measured by San Luis CPI) ......................... 27.0% 23.3% 23.0% 31.9% 39.0% 31.6% Inflation (as measured by the City of Buenos Aires CPI) ........................................................... ------ ------ ------ 26.6% 38.0% 26.9% ------ ------ ------ ------ ------ ------ NATIONAL ECONOMY Real GDP (in billions of 1993 pesos) .............................. 422.13 459.57 468.30 Rate of change from prior year (1993 pesos) .................. 9.2% 8.9% 1.9% Real GDP (in billions of 2004 pesos) .............................. ------ ------ ------ Rate of change from prior year (2004 pesos) .................. ------ ------ ------ ------ 0.4% ------ 7.3% 6.7% 6.9% 6.4% 6.9% ------ Unemployment rate (1) ..................................................... 758.76 762.07 ------ PROVINCIAL PUBLIC SECTOR FINANCES Total Revenues ................................................................ 69.38 90.29 111.43 150.05 202.98 274.31 Total Expenditures........................................................... 72.13 98.43 120.29 151.08 202.18 295.78 (0.81) (5.60) (5.3)1 3.32 7.52 (11.6) ........................................................ (2.75) (8.14) (8.86) (1.03) 0.80 (21.47) ................................................................. (0.84) (6.14) (7.38) (7.88) (9.75) (19.26) 31.96 33.67 40.27 39.89 38.33 51.42 ............................ 21.06 27.17 32.24 41.99 51.98 70.66 Total debt ..................................................................... 53.02 60.84 72.51 81.88 90.31 122.09 Total debt (in billions of USD )(6) .................................... 13.34 14.14 14.74 12.56 10.56 9.36 (2) Primary Fiscal Balance ................................................. Financial Balance Total results (4) (3) PROVINCIAL PUBLIC SECTOR DEBT Peso-denominated debt (5) ................................................ Foreign-currency-denominated debt (6) (6) Debt as a % of nominal GDP (6) ....................................... 10.2% 9.2% 9.1% 8.4% 7.1% Debt as a % of total revenues ........................................ 76.4% 67.4% 65.1% 54.6% 44.5% (6) (1) (2) (3) (4) (5) (6) Source: -----44.5% Based on the Encuesta Permanente de Hogares (Permanent Household Survey or “EPH”) conducted in 28 major cities. According to INDEC, the current methodology to conduct the EPH is applied to every major city except Rawson - Trelew, San Nicolás -Villa Constitución and Viedma - Carmen de Patagones, where the EPH is still being conducted pursuant to the old methodology because of resource constraints in cities in the interior of Argentina. Excluding interest payments. Represents the primary fiscal balance minus interest payments. Represents total surplus (deficit) plus borrowings, minus debt repayments. Includes debt denominated in CER-adjusted pesos. Excluding past due interest payments. Provincial Office of Statistics; Ministry of Economy of the Province; Federal Ministry of Economy and Public Finance. 1 The Province General The Province is the largest in terms of geographic size and population of the 23 provinces of Argentina, with an area of 304,907 square kilometers and a population of approximately 16.6 million inhabitants. It is located in the central-eastern part of the country, in a region known as the “Pampas.” The capital of the Province is the city of La Plata. The executive branch consists of a Governor and a Vice Governor, who are elected by popular vote for a period of four years, and a number of ministries, secretariats and other provincial governmental agencies. The legislative branch consists of the Senate and the House of Deputies. The judicial branch consists of trial courts, courts of appeals and the Provincial Supreme Court, which have jurisdiction over civil, commercial, administrative, labor, family and criminal matters within the Province. In addition, the provincial constitution provides for the existence of certain provincial agencies that do not fall under any of the three branches of government. Each of the Province’s 135 municipalities has its own government, responsible for providing basic local services. Pursuant to provincial law, the Province’s municipalities are entitled to receive a percentage of the taxes collected by the Province and the federal government. In addition, several municipalities are entitled to collect certain provincial taxes. The current President of Argentina, Mauricio Macri, and the Governor of the Province, María Eugenia Vidal, took office in December 2015. Both of them belong to the Cambiemos(“Let’s Change”) political coalition. The triumph of Mauricio Macri in the Presidential election and María Eugenia Vidal in the provincial election implies a significant political shift in Argentina. For the first time in 28 years the Province of Buenos Aires is not under a Partido Justicialista (Justicialist Party, or “PJ”) administration. Regarding the federal government, the triumph of Mauricio Macri ends 14 years of PJ administrations. Mauricio Macri, the leader of Cambiemos, was the Mayor of the City of Buenos Aires from 2007 to December 2015. María Eugenia Vidal was Vice Mayor of the City of Buenos Aires from 2011 to December 2015 and a cabinet member from 2007 to 2011. Since assuming office, Mauricio Macri’s administration has implemented several significant economic and policy reforms, including (i) reforming INDEC, (ii) changes in foreign exchange regulations, (iii) changes in foreign trade regulation that aimed to foster exports through the reduction of export duties on agricultural products, (iv) reduction in subsidies to residential energy users (excluding low income households), gas and transport aimed at reducing the fiscal deficit, and (v) the declaration of an energy infrastructure state of emergency. See “Risk Factors—Risks Relating to the Province—The recent Presidential elections and the change in the governing political party in Argentina may create certain uncertainties that could impact the Argentine and provincial economies and the securities market.” In addition, the Macri administration restarted negotiations and in April 2016 settled claims with certain holdout creditors that did not participate in the Argentine 2005 and 2010 debt restructurings. As of the date of this offering memorandum, although the vast majority of claims in litigation have been settled, litigation initiated by some holdout creditors continues in several jurisdictions. For more information, see “Risk Factors— Risks Relating to the Province—Argentina’s ability to obtain financing from international markets is limited, which may impair its ability to implement reforms and foster economic growth.” The next elections for President of Argentina and for Governor of the Province are scheduled to take place in 2019, while the next legislative elections will take place in 2017. Province’s issuer rating On February 5, 2016, Standard and Poor’s upgraded the issuer rating of the Province of Buenos Aires on its foreign currency global scale from CCC- to B- (3 notches), with a stable outlook. Additionally, on April 21, 2016, Moody’s upgraded the issuer rating of the Province of Buenos Aires on its foreign currency global scale from Caa2 to B3 (2 notches), with a stable outlook. These ratings do not necessarily represent the rating of the Notes, which may differ from the Province’s issuer rating. 2 The Provincial Economy The provincial economy accounts for approximately 36.0% of the Argentine economy and its economic cycle is closely tied to that of Argentina. In 2014, the Province’s real GDP increased by 0.4%, from ARS 180.91 billion in 2013 to ARS 181.59 billion in 2014. In 2015, quarterly economic activity indicators developed by the Province, which track quarterly variations in economic activity in order to anticipate changes in annual GDP at constant prices, showed increases of 1.9% and 3.9% during the first and second quarters, respectively, in each case as compared to the same quarters of 2014. The Province has a well-diversified economy. The Province’s most significant economic sectors are (i) manufacturing, (ii) real estate and business activities, (iii) retail and wholesale commerce, (iv) transport, storage and communications, (v) education, social and health services, (vi) construction, and (vii) agriculture, livestock, hunting and forestry. Historically, the Province’s manufacturing sector has been the single largest contributor to provincial GDP. Public Sector Finances In 2015, the primary balance recorded a deficit of ARS 11.60 billion, compared to a surplus of ARS 7.52 billion in 2014. In 2015, a financial deficit of ARS 21.47 billion was recorded, as compared to a financial surplus of ARS 0.8 billion in 2014. Main Sources of Revenues From 2011 through 2015, 71.4% of provincial revenues were derived from taxes, either federal or provincial, on average. During this period, provincial tax collections represented 42.6% of total revenues, while federal tax transfers represented 28.8% of total revenues, on average. Federal Tax Transfers. Under the federal tax co-participation regime, the federal government is required to transfer to a federal tax co-participation fund, 64% of income tax revenues, 89% of value added tax revenues, 100% of presumptive minimum income tax revenues and 30% of financial transaction tax revenues, among others. Out of these revenues, ARS 549.6 million is allocated to the Fondo de Desequilibrios Fiscales Provinciales (Provincial Tax Imbalance Fund). After this allocation, 15.0% of all remaining funds are allocated to the federal social security system. The remaining 85.0% is distributed among the federal government, the City of Buenos Aires and the provinces, with approximately 42.3% of the balance being allocated to the federal government, the Province of Tierra del Fuego and the City of Buenos Aires; 1.0% being allocated to an emergency fund; and approximately 56.7% being allocated to the provinces to be shared among them according to percentages set forth in the federal tax co-participation law. The Province is currently entitled to 21.7% of funds allocated to the provinces under the co-participation regime. The Province is required to transfer a portion of these funds to the municipalities and is entitled to manage the remaining funds in its sole discretion. On May 18, 2016, the federal government, the governors of most provinces, including the Province of Buenos Aires, and the Vice-Mayor of the City of Buenos Aires signed an agreement to gradually reduce the 15.0% deduction of the co-participable revenues at an annual rate of 3% from 2016 to 2020. The agreement is subject to approval by the federal Congress and the respective legislatures. See “Public Sector Finances—Main Sources of Revenues—Federal Tax Co-Participation Regime.” Provincial Revenues. The main source of provincial revenues is the collection of provincial taxes. In 2015, 60.3% of total tax revenues were provincial tax revenues. The main taxes are gross revenue tax, real estate tax, automobile tax, stamp tax and energy tax. The Province also derives non-tax revenues from various provincial sources, including transfers of net profits or surpluses from provincial entities such as the Institute of Lotteries and Casinos and the Loan Recovery Committee, fees collected by the provincial judicial system, interest on loans granted to municipalities or other provincial agencies and enterprises, and proceeds from the lease of provincial land. 3 Composition of Expenditures The Province’s expenditures are allocated mainly to education, health programs, social programs, municipalities, investments in public infrastructure and services, police, courts, prisons and general provincial administration. Combined spending on education, health programs, social programs, investments in public infrastructure and services, police, courts and prisons and general provincial administration accounts for approximately 70.0% of the Province’s total expenditures (excluding debt interest). Provincial spending can be broken down in capital and current expenditures. Current expenditures consist of costs of personnel, goods and services and current transfers, which include transfers to municipalities under the provincial tax co-participation regime and to unconsolidated provincial agencies and enterprises. Capital expenditures include capital investment, loans and capital contributions to provincial enterprises and loans and transfers to municipalities for public works. The Province’s total expenditures for 2015 increased by 46.3%, to ARS 295.77 billion from ARS 202.18 billion during 2014, mainly due to a 50.5% increase in personnel expenditures, to ARS 147.83 billion in 2015 from ARS 98.24 billion in 2014, principally reflecting the cumulative effect of salary increases granted in 2014 and 2015. The 2016 Budget Pursuant to the constitution of the Province, the executive branch must submit a draft budget law for each upcoming year during the prior year. The budget represents an estimate of future revenues and also constitutes an authorization of, and a limit on, expenditures and indebtedness by the Province for the budgeted period. The provincial legislature has broad powers to amend or reject the draft budget law submitted by the executive branch. The new Governor of the Province, María Eugenia Vidal, submitted a budget proposal for 2016 to the provincial legislature on December 16, 2015. On January 14, 2016, the provincial legislature approved Law No. 14,807 (the “2016 Budget Law”) with certain modifications. The 2016 Budget establishes a primary balance deficit of ARS 16.10 billion, as compared to a primary balance deficit of ARS 11.60 billion for 2015, and a financial deficit of ARS 25.82 billion in 2016 as compared to a financial deficit of ARS 21.47 billion for 2015. The budget allows the Province to borrow up to ARS 60.0 billion during 2016 to fund social, infrastructure and other public investment projects currently under way or that are planned to be carried out during 2016, as well as to improve the debt maturity profile of the Province and make debt service payments. Public Sector Debt The Province satisfies its financing needs from a wide variety of sources depending on the provincial and federal economies and the domestic and international financial markets. The Province’s total indebtedness decreased in recent years. It amounted to USD 14.74 billion, USD 12.56 billion, USD 10.56 billion and USD 9.36 as of December 31, 2012, December 31, 2013, December 31, 2014 and December 31, 2015, respectively. As of March 31, 2015 the Province’s total indebtedness, measured in U.S. dollars, amounted to USD 10.43 billion. As of March 31, 2016, the federal government held 27.7% of the Province’s total indebtedness, while 63.8% was held by local and international bondholders, 7.1% corresponded to multilateral credit organizations and the remaining 1.3% was held by bilateral credit agencies and other creditors. As of March 31, 2016, 35.3% of the Province’s total indebtedness was denominated in pesos, with the remaining 50.4%, 13.4%, 0.6% and 0.3% denominated in U.S. dollars, Euros, other currencies and CER adjusted pesos, respectively. Also, as of March 31, 2016, 97.5% of the Province’s debt stock was medium-term and long-term and 63.3% was at fixed rate. The Province debt stock, measured in pesos, increased ARS 31.26 billion during the three-month period ended March 31, 2016, mainly due to: • the issuance in the international capital markets of USD 1.25 billion 9.125% bonds due 2024 on March 16, 2016, which accounted for 55.1% of the total increase during the first quarter of 2016. 4 • ARS 10.2 billion net increase in debt as a result of the peso depreciation against the dollar, Euro and CHF, which represents 31.1% of the total increase; • bonds issued in the local capital market which accounted for 10.8% of the total debt increase, including the Bond for the Cancelation of Provincial Obligations - Decree No. 62/16 (“Suppliers Bond”) for ARS 3.6 billion and others bond issuances for ARS 17.4 million; • capitalized interest for ARS 834.5 million due to an extension of the grace period relating to indebtedness with the federal government, which represented 2.5% of the total increase in the first quarter of 2016; • new disbursements of debt with the federal government, which represented in the aggregate 0.3% of the total increase; • the disbursements of outstanding multilateral credit lines, for a total amount of ARS 5.5 million, which represented less than 0.1% of the total increase during the first quarter of 2016; and • the impact of inflation on debt denominated in pesos and adjusted by CER, which accounted for an ARS 67.9 million, which represented 0.2% of the total increase during the first quarter of 2016. These increases were partially offset by the following decreases: • amortization payments of debt issued in the local capital market and other debt reductions for ARS 879.0 million. This amount includes (i) an ARS 514.9 million repayment of Treasury bills, (ii) an ARS 208.4 million repayments of bonds originally issued for the cancellation of debts with suppliers and contractors. See “Public Sector Finances—Debt Denominated in Pesos—Bonds for the Cancellation of Debts with Suppliers and Contractors – Law No. 14,315), (iii) an ARS 142.9 million repayments of bonds for the cancellation of provincial debts and (iv) an ARS 12.8 million repayment of other debts; • amortization payments of indebtedness with the federal government for ARS 562.8 million, including the first amortization payment of the 2015 Financial Assistance Agreement for ARS 501.6 million; and • repayments of multilateral credit lines totaling in the aggregate ARS 212.8 million. Banco Provincia Banco Provincia is the second largest bank in Argentina in terms of total deposits and assets, with deposits of ARS 146.19 billion and total assets of ARS 162.76 billion as of March 31, 2016. The Province is the sole owner of Banco Provincia. Banco Provincia is an entidad autárquica (self-administered public institution) governed by a board of directors appointed by the Governor of the Province with the approval of the provincial Senate. Banco Provincia acts as the financial agent of the Province and collects provincial taxes and duties on the Province’s behalf. The Province guarantees all deposits and other liabilities of Banco Provincia. However, creditors of Banco Provincia that seek to enforce the guarantee must exhaust all legal remedies against Banco Provincia before requesting payment from the Province under the guarantee. Although Banco Provincia is exempt from compliance with Argentine financial and banking regulations, it voluntarily adheres to the regulatory framework of the Argentine financial sector and therefore complies with the banking regulations and rules adopted by the Central Bank, including minimum capital, solvency and liquidity requirements and the supervisory powers of the Central Bank. Because of its special status as a provincial self-administered public institution, Banco Provincia is not subject to any federal income or other tax liability. As of March 31, 2016, Banco Provincia’s exposure to the public sector totaled approximately ARS 25.43 billion, accounting for approximately 15.6% of its total assets at that date. 5 The Offering The following is a brief summary of some of the terms of this offering. For a more complete description of the terms of the Notes, see “Description of the Notes” in this offering memorandum. Issuer...................................................................... The Province of Buenos Aires. Notes Offered ........................................................ USD 500,000,000 aggregate principal amount of 5.750% Notes due 2019. USD 500,000,000 aggregate principal amount of 7.875% Notes due 2027. Final Maturity ........................................................ June 15, 2019 with respect to the 2019 Notes and June 15, 2027 with respect to the 2027 Notes. Interest Payment Dates .......................................... June 15 and December 15, beginning December 15, 2016. Payment of Principal.............................................. The Province will pay the principal of the 2019 Notes on June 15, 2019. The Province will pay the principal of the 2027 Notes in three installments: 33.33% on June 15, 2025, 33.33% on June 15, 2026 and 33.34% on June 15, 2027. The Notes will represent a claim to their full principal due on each amortization date (plus accrued and unpaid interest) or upon earlier acceleration in accordance with their terms. Status ..................................................................... The Notes are direct, general, unconditional and unsubordinated Public External Indebtedness of the Province. The Notes rank and will rank without any preference among themselves and equally with all other unsubordinated Public External Indebtedness of the Province. It is understood that this provision shall not be construed so as to require the Province to make payments under the Notes ratably with payments being made under any other Public External Indebtedness of the Province. See “Description of the Notes—Status.” Covenants .............................................................. The indenture governing the Notes contains covenants that, among other things, limit the Province’s ability to issue or assume any indebtedness secured by a lien on any of its property or assets unless the Notes are secured equally and ratably with such indebtedness. These covenants are subject to important exceptions and qualifications, which are described under the heading “Description of the Notes” in this offering memorandum. Use of Proceeds ..................................................... The gross proceeds from the offering, before commissions and other expenses payable by the Province, will be USD 1,000,000,000. The Province intends to use the net proceeds to fund social, infrastructure and other public investment projects currently under way or that are planned to be carried out during 2016, as well as to improve the debt maturity profile of the Province and make debt service payments. In addition, 11.66% and 5.0% of the proceeds will be affected to the Fondo para Infraestructura Municipal (Municipal Infrastructure Fund) and to the Fondo Municipal de Fortalecimiento de la Seguridad Y Otros Servicios Asociados (Strengthening 6 Security and Other Related Services Municipal Fund), respectively, in accordance with articles 33, 34 and 35 of the 2016 Budget Law. Further Issuances ................................................... The Province may from time to time, without the consent of the holders of the 2019 Notes or 2027 Notes, create and issue additional notes having terms and conditions which are the same as those of the 2019 Notes or 2027 Notes (as applicable) in all respects, except for the issue date, issue price and first payment date of interest on the 2019 Notes or 2027 Notes (as applicable); provided, however, that any such additional Notes subsequently issued that are not fungible with the previously outstanding 2019 Notes or 2027 Notes (as applicable) for U.S. federal income tax purposes shall have a separate CUSIP, ISIN or other identifying number from such previously outstanding Notes. Additional 2019 Notes or 2027 Notes (as applicable) issued in a qualified reopening for U.S. federal income tax purposes will be consolidated with and will form a single series with the previously outstanding 2019 Notes or 2027 Notes (as applicable). Form and Settlement .............................................. The Province will issue the Notes in fully registered form, without interest coupons attached, only in denominations of USD 150,000 and in integral multiples of USD 1,000 in excess thereof. The Notes will be registered in global form in the name of a nominee of a common depositary for Euroclear Bank S.A./N.V., as operator of Euroclear and Clearstream. See “Description of the Notes— Registration and Book-Entry System.” ISIN and Common Codes ...................................... The Notes offered hereby and sold pursuant to Rule 144A and Regulation S under the Securities Act will have the ISIN and Common Code numbers indicated herein below. Risk Factors ........................................................... 2019 Notes Rule 144A .......... Regulation S ...... ISIN Number XS1433314157 XS1433314231 Common Code 143331415 143331423 2027 Notes Rule 144A .......... Regulation S ...... ISIN Number XS1433314587 XS1433314314 Common Code 143331458 143331431 See “Risk Factors” and the other information in this offering memorandum for a discussion of factors you should carefully consider before deciding to invest in the Notes. 7 RISK FACTORS An investment in the Notes involves a significant degree of risk. Before deciding to purchase the Notes, you should read carefully all of the information contained in this offering memorandum, including, in particular, the following risk factors. Risks Relating to the Province Investing in a developing country such as Argentina, in which the Province is a political subdivision, entails certain inherent risks. The Province is located in Argentina, which is a developing economy. Investing in developing economies generally involves risks. These risks are associated with political, social and economic events that may affect Argentina’s economic results. In the past, instability in Argentina and in other Latin American and developing countries has been caused by many different factors, including the following: • adverse external economic shocks; • dependence on external financing; • inconsistent fiscal and monetary policies; • high levels of inflation; • changes in currency values; • high interest rates; • price controls; • exchange rate and capital controls; and • political and social tensions. In 2001 and 2002, Argentina suffered a major political, economic and social crisis, which resulted in a severe economic contraction with significant increases in unemployment and poverty rates. Among other consequences, the crisis caused a large currency devaluation and the Argentine government to default on its external debt. The government imposed numerous emergency measures which affected public companies and other sectors of the economy. In this environment, the Province also defaulted on its external debt. The Argentine economy has recovered significantly after the 2001-2002 crisis, although it has been suffering from high inflation and has stagnated in the last four years. This was mainly due to certain monetary and fiscal policies, severe foreign exchange controls that disincetivized exports and investments, and the decline in commodities prices, among other factors. Since the first weeks after assuming office, the Macri administration has introduced significant economic and policy reforms. See “—The recent Presidential elections and the change in the governing political party in Argentina may create certain uncertainties that could impact the Argentine and provincial economies and the securities market” below. In addition, the Macri administration restarted negotiations and in April 2016 settled claims with certain holdout creditors that did not participate in the Argentine 2005 and 2010 debt restructurings. As of the date of this offering memorandum, although the vast majority of claims in litigation have been settled, litigation initiated by some holdout creditors continues in several jurisdictions. See “—Argentina’s ability to obtain financing from international markets is limited, which may impair its ability to implement reforms and foster economic growth.” Argentina has experienced political, social and economic instability in the past and may experience further instability in the future. Any of these factors may adversely affect the liquidity, trading markets and value of Argentina’s debt securities and Argentina’s ability to service its debt. The Province’s economic conditions depend, to a 8 large extent, on the macroeconomic and political conditions prevailing in Argentina. Worsening economic conditions in the country could have an adverse effect on the Province’s economy, current revenues and ability to service its debt obligations, including the Notes. The Province is a political subdivision of Argentina and, as a result, the Province’s economic performance is subject to general economic conditions in Argentina and to decisions and measures adopted by the federal government, which it does not control. Because the Province is a political subdivision of Argentina, the Province’s economic performance and public finances are subject to general economic conditions in Argentina and may be significantly affected by national events, such as the 2001 national economic crisis, and by decisions and measures adopted by the federal government, including those related to inflation, monetary policy and taxation. The Province does not control any of these events or decisions. As a result, you should also carefully consider the economic and other information periodically made public by Argentina. The Province does not take part in the formulation of such information. Moreover, because a significant part of the national population resides in the Province’s territory and the Province’s economy represents a significant part of the national economy, the Province and the federal government have established close political and economic ties, which may lead the Province to adopt economic decisions and measures that are in line with those adopted by the federal government. The interests of the Province, however, may not always be aligned with those of the federal government or other Argentine provinces and, as a result, the Province cannot assure you that future decisions or measures adopted by the federal government will not have an adverse effect on the Province’s economy that may affect its ability to service its debt obligations, including the Notes. The recent Presidential elections and the change in the governing political party in Argentina may create certain uncertainties that could impact the Argentine and provincial economies and the securities market. Presidential and Congressional elections in Argentina took place on October 25, 2015, and a runoff election (ballotage) between the two leading Presidential candidates was held on November 22, 2015, which resulted in Mr. Mauricio Macri (from the Cambiemos coalition) being elected President of Argentina. The Macri administration assumed office on December 10, 2015. Since assuming office, the Macri administration has announced or executed several significant economic and policy reforms, including: • INDEC reforms. On January 8, 2016, based on its determination that INDEC had failed to produce reliable statistical information, particularly with respect to CPI, GDP, poverty and foreign trade data, the new administration declared a state of administrative emergency for the national statistical system and INDEC until December 31, 2016. INDEC is expected to implement certain methodological reforms and adjust certain macroeconomic statistics on the basis of these reforms. As of the date of this offering memorandum, INDEC has begun publishing certain revised data, including foreign trade and balance of payment statistics. • Foreign exchange reforms. The Macri administration eliminated a significant portion of foreign exchange restrictions, including certain currency controls, that were imposed by the previous administration. These reforms are expected to provide greater flexibility and easier access to the foreign exchange market for individuals and private sector entities. The principal measures adopted as of the date of this offering memorandum include (i) the elimination of the requirement to mandatory transfer and settle the proceeds from new foreign financial indebtedness incurred by the financial sector, the non-financial private sector and local governments through the MULC (except that the evidence of the mandatory transfer and settlement of funds through the MULC will still be required for subsequent access to the MULC in order to repay principal and interest of such indebtedness, except in certain instances with respect to local government debt); (ii) the reduction of the mandatory minimum period in which the proceeds of any new financial indebtedness and renewal of existing indebtedness incurred by residents, held by foreign creditors and transferred through the MULC must be kept in Argentina, from 365 calendar days to 120 calendar days from the date of the transfer of the relevant amount; (iii) in the case of partial or total prepayment of principal corresponding to foreign financial indebtedness, access to the MULC is permitted 9 subject to the mandatory minimum period mentioned above; (iv) the ability of Argentine residents to purchase foreign currency in an amount up to USD 5.0 million per month to acquire offshore assets without specific allocation or prior appoval; (v) the reduction from 30% to 0% of a mandatory, nontransferable and non-interest bearing deposit of the amount of certain transactions involving foreign currency inflows for a 365 calendar day period and (vi) the elimination of the requirement of a minimum holding period (72 business hours) related to the purchase and sale of securities authorized to be listed or negotiated in different stock local and international exchange markets. In addition, on December 17, 2015, because certain restrictions were lifted, the peso devalued against the U.S. dollar. See “Exchange Controls.” • Foreign trade reforms. The Argentine government eliminated export duties on wheat, corn, beef, mining and regional products, and reduced the duty on soybean exports by 5%, from 35% to 30%. Further, a 5% export duty on most industrial exports was eliminated. With respect to payments for imports and services to be performed abroad, the Macri administration announced the gradual elimination of amount limitations for access to the MULC for any transactions originated before December 17, 2015. Pursuant to Communication “A” 5955, as amended, the amount limitations were eliminated on April 22, 2016. With respect to the transactions executed after December 17, 2015, no amount limitation will be applicable. Further, the Macri administration announced the replacement of the DJAI with a new import procedure that requires certain filings and import licenses for certain goods (including textiles, footwear, toys, domestic appliances and automobile parts), which, unlike the previous system, does not require discretionary federal government approval of payments for the import of products through the MULC. • Deficit Reduction. The Argentine government announced its intention to reduce its primary budget deficit from approximately 5.8% of GDP in 2015, to 4.8% of GDP in 2016 and 3.3% of GDP in 2017, in part by eliminating public services subsidies currently in effect. • Correction of monetary imbalances. The Macri administration announced the adoption of an inflation targeting regime in parallel with the floating exchange rate regime and set inflation targets for the next four years, including a band of 20-25% for 2016. The Central Bank has increased stabilization efforts to reduce excess monetary imbalances and raised peso interest rates to offset inflationary pressure. • Infrastructure state of emergency and reforms. The Argentine government has also declared a state of emergency with respect to the national electricity system, which will remain in effect until December 31, 2017. The state of emergency will allow the Argentine government to take actions designed to ensure the supply of electricity to the country by taking such actions as instructing the Ministry of Energy to design and implement, with the cooperation of all federal public entities, a coordinated program to guarantee the quality and security of the electricity system and rationalize public entities’ consumption of energy. In addition, through Resolution No. 6/2016 of the Ministerio de Energía y Minería de la Nación (National Ministry of Energy and Mining) and Resolution No. 1/2016 of the Ente Nacional Regulador de la Electricidad (National Electricity Regulatory Agency), the Macri administration announced the elimination of certain energy subsidies currently in effect and a substantial increase in electricity rates. As a result, average electricity prices have already increased and could increase further. By correcting tariffs, modifying the regulatory framework and eliminating the federal government’s role as an active market participant, the new administration aims to correct distortions in the energy sector and stimulate investment. In addition, on April 5, 2016, the federal government announced its intention to submit to the federal Congress a draft bill to amend the Value Added Tax (the “VAT”) regime to permit rebates of VAT paid on the purchase of certain staples by retired taxpayers that receive minimum pensions as well as beneficiaries of social programs. The ultimate long –term impact of these measures on the national economy cannot be predicted and the Macri administration’s ability to implement all announced measures as currently contemplated cannot be assured. Measures that would require modifications to the 2016 budget approved by the federal Congress in October 2015 and other legislative measures will require support from opposition parties. The inability of the Macri administration to properly 10 implement its agenda as a result of lack of political support may adversely affect the Argentine economy and financial condition and, as a consequence, the economy and financial condition of the Province. The provincial elections and the change in the governing political party in the Province may create certain uncertainties that could impact the economy and financial condition of the Province. In the recent elections for Governor and the legislature in the Province, political parties opposed to the Vidal administration retained a majority of the seats in the provincial legislature, requiring the Vidal administration to seek political support from the opposition for its economic proposals. This creates further uncertainty in the ability of the Vidal administration to pass any measures. The inability of the Vidal administration to properly implement measures as a result of lack of political support may adversely affect the economy and financial condition of the Province. The Province is a defendant in various lawsuits related to its 2002 default on its public external indebtedness. There are currently 14 final and non-appealable judgments and three lawsuits pending against the Province related to the Province’s 2002 default on its bonds. These judgments and lawsuits are under three different jurisdictions: the United States of America, Germany and Switzerland. In the United States of America, there are six final and non-appealable judgments outstanding against the Province for a total principal amount of USD 424,000 and EUR 201,000 (excluding interest, costs and attorney’s fees), and one lawsuit that remains pending for a total principal amount of USD 85,000 (excluding interest, costs and attorney’s fees). In Germany, there are five final and non-appealable judgments outstanding against the Province for a total principal amount of EUR 2,484,000 (excluding interest, costs and attorney’s fees), and two pending lawsuits for a total principal amount of EUR 31,000 (excluding interest, costs and attorney’s fees). In Switzerland, there are three final and non-appealable judgments outstanding against the Province for a total principal amount of CHF 600,000 (excluding interest, costs and attorney’s fees). The Province can give no assurance that further litigation will not result in even more substantial judgments against the Province. Present or future litigation could result in the attachment or injunction of assets of the Province that it intends for other uses, including payments due under the Notes, and could have a material adverse effect on the Province’s public finances. Increases in personnel expenditures may have a significant adverse effect on the public finances of the Province and its ability to service its debt. Between 2011 and 2016, the Province’s number of public employees authorized to be hired for each fiscal year by the respective budget law has increased significantly, from 499,026 in 2011 to 586,468 in 2016. Personnel expenditures represent the largest expenditure of the Province and during 2015 it reached 51.9% of total current expenditures. The public sector employees of the Province are represented by 35 separate unions, including five teachers unions and one union for judicial employees. Wage negotiations usually begin every December for the following year, although for 2016, they began in February of the same year. Public employees demanded higher wages to keep pace with inflation. In February 2016, an agreement was reached with the teachers’ union, which includes a 3% wage increase effective as of February 1, 2016, an aggregate 16% increase effective as of March 1, 2016 and an aggregate 25% increase effective as of July 1, 2016. Furthermore, the federal government agreed to increase its contributions to the Federal Teacher’s Incentive Fund by ARS 400 per teacher position effective as of February 1, 2016 and to an aggregate contribution of ARS 700 per teacher position by July 1, 2016. In addition, the Province has reached agreements with approximately 99% of the provincial public sector employees. These agreements include different types of increases. With respect to semi-annual increases, the wage agreements include a cumulative wage increase of 15% to be granted in two stages. With respect to annual increases, the wage agreements include a cumulative increase of up to 28% to be granted in three to four stages. The Province expects to restart negotiations with those unions that agreed to semi-annual wage increases, which account for approximately 23% of the total employees. See “Public Sector Finances—Composition of Expenditures—Current Expenditures—Personnel.” The Province has limited flexibility to reduce personnel expenses in the future, as the 11 employees are covered by constitutional guarantees of job security. As a result, increases in personnel expenditures may have an adverse effect on the Province’s economy, financial condition and ability to service its debt obligations, including the Notes. If the Federal Council of Fiscal Responsibility were to determine that the Province’s budget did not comply with the Fiscal Responsibility Law, the Province could be subject to sanctions. In August 2004, the federal Congress adopted Law No. 25,917, the Fiscal Responsibility Law, which became effective on January 1, 2005. This law establishes a fiscal regime for the federal government and the provinces relating to transparency in public administration, expenditures, fiscal balances and indebtedness and, in particular, requires balanced budgets. In 2009, the federal Congress enacted Law No. 26,530, which suspended for 2009 and 2010 some of the general rules of the Fiscal Responsibility Law, including the prohibition on the use of proceeds of new indebtedness to fund current expenditures and the freeze on new borrowings if debt service obligations exceed 15.0% of current revenues (net of transfers to municipalities). On December 29, 2010, the federal government issued Decree No. 2054/10, which extended the application of Law No. 26,530 (and therefore, the suspension of certain provisions of the Fiscal Responsibility Law referred above) through 2011. National budget laws for 2012, 2013, 2014, 2015 and 2016 extended the suspension of the above mentioned law to each of such years. The Fiscal Responsibility Law also created the Consejo Federal de Responsabilidad Fiscal (the Federal Council of Fiscal Responsibility), which is comprised of representatives from the federal and provincial governments and is responsible for controlling compliance by the provinces and the federal government with the Fiscal Responsibility Law. As of the date of this offering memorandum, the Federal Council of Fiscal Responsibility has never imposed sanctions on any province for non-compliance with the Fiscal Responsibility Law. However, if the Federal Council of Fiscal Responsibility determines that the Province’s budget does not comply with the currently applicable sections of the Fiscal Responsibility Law, the Province could be subject to sanctions, including restrictions on federal tax benefits for the provincial private sector, limitations on guaranties from the federal government, denial of authorizations for further borrowings and limitations on federal transfers (other than federal tax transfers mandated by law, including co-participation transfers). The Province has received financial assistance from the federal government to finance its fiscal deficit during the last years and if the federal government does not renew its financial assistance or if the Province is unable to secure financing elsewhere, the Province may not be able to meet its debt service obligations, including on the Notes. During the 2001 economic crisis, the Province defaulted on a significant part of its debt obligations and, as a result, it was unable to obtain financing from domestic and international lenders, including through the capital markets. Consequently, the Province started to receive financial assistance from the federal government to cover all or a part of its liquidity shortfalls. In recent years, although the Province has been able to access the capital markets, it has continued to receive assistance from the federal government, primarily to cover its deficits. The Province expects to continue to receive assistance from the federal government to finance a portion of its primary balance budget deficit, and expects to continue to refinance the Province’s outstanding debt with the federal government. If the federal government were to stop providing financial assistance to the Province or if the Province were unable to secure alternative sources of financing elsewhere, the Province may not be able to meet its debt service obligations, including on the Notes. The Province’s sources of financing may become unavailable or limited and, as a result, this may have an adverse effect on its economy and ability to service its debt obligations, including the Notes. The Province’s primary balance may be insufficient to meet its debt service obligations, including the Notes. Although the Province obtained international capital markets financing to cover part of the Province’s deficit in recent years, including this year, the Province cannot assure you that foreign investors and lenders will be willing to lend money to the Province in the future, or that the Province will be able or willing to access international capital markets. The Province also cannot assure you that local sources of financings will remain available. The loss or limitation of these sources of financing or the Province’s inability to attract or retain foreign investment in the future could adversely affect the Province’s economic growth and public finances and ability to service its debt obligations, including the Notes. An increase in inflation could have a material adverse effect on the Province’s economic prospects. 12 In recent years, Argentina has experienced high inflation rates. According to INDEC inflation was 10.9% in 2010, 9.5% in 2011, 10.8% in 2012, 10.9% in 2013, and 23.9% in 2014; according to the City of Buenos Aires CPI, inflation was 26.6% in 2013, 38.0% in 2014 and 26.9% in 2015; according to the Province of San Luis CPI, inflation was 27.0% in 2010, 23.3% in 2011, 23.0% in 2012, 31.9% in 2013, 39.0% in 2014 and 31.6% in 2015. According to calculations made by the City of Buenos Aires, in January, February and March 2016, monthly inflation was 4.1%, 4.0% and 3.3%, respectively; whereas according to the Province of San Luis CPI, monthly inflation was 4.2%, 2.7% and 3.0%, respectively. Continuing high inflation rates could negatively affect the Province’s economic growth and its ability to service its debt obligations, including the Notes. The Province cannot assure you that inflation rates will decline or remain stable in the future, or that the measures adopted or that may be adopted by the federal government to control inflation will be effective or successful. The factors that contribute to inflation is mainly the result of the federal government economic policies which are not under the control of the Province. In addition, a small portion of the provincial outstanding debt (less than 1%) and approximately 7.2% of the federal government’s outstanding debt is adjusted by reference to the CER index, which was linked to the INDEC CPI until 2015, to the City of Buenos Aires CPI between January and March 2016 and to the Province of San Luis CPI until May 25, 2016. Therefore, any significant increase in the inflation rates could increase the federal and provincial outstanding debt and, consequently, have an adverse effect on Argentina’s and the Province’s financial conditions, respectively. Exchange controls and restrictions on capital inflows and outflows imposed by the Central Bank may continue to limit the availability of international credit and the liquidity of the market for securities of the Provinces. In 2001 and 2002, following a run on the financial system triggered by the public’s lack of confidence in the continuity of the convertibility regime that resulted in massive capital outflows, the federal government implemented exchange controls and restrictions on the transfer of foreign currency in an attempt to prevent capital flight and a further depreciation of the peso. These exchange controls substantially limited the ability of issuers of debt securities, among others, to accumulate or maintain foreign currency in Argentina or make payments abroad. Although several of such exchange controls and transfer restrictions were subsequently suspended or terminated, in June 2005 the federal government issued a decree that established new controls on capital flows, which in turn resulted in a decrease in the availability of international credit for Argentine companies and provinces. In addition, from 2011 until President Macri took office in December 2015, the Argentine government increased controls on the sale of foreign currency and the acquisition of foreign assets by local residents, limiting the possibility of transferring funds abroad. Furthermore, during this time new regulations were issued from 2012 until President Macri took office pursuant to which certain foreign exchange transactions were subject to prior approval by Argentine tax authorities. During the Fernández de Kirchner administration, through a combination of foreign exchange and tax regulations, the Argentine authorities significantly curtailed access to the foreign exchange market by individuals and private-sector entities. The extensiveness of exchange controls introduced in the past and in particular after 2011 during the Fernández de Kirchner administration gave rise to an active unofficial U.S. dollar trading market, and the peso/U.S. dollar exchange rate in such market substantially differed from the official peso/U.S. dollar exchange rate. As of the date of this offering memorandum, some of the aforementioned exchange controls implemented during the Fernández de Kirchner administration have been eliminated or relaxed by the Macri administration. Notwithstanding the measures recently adopted by the Macri administration, the Central Bank and the federal government may impose new exchange controls and restrictions on transfers abroad that may further discourage lending by foreign investors and have an adverse effect on the economy and the Province, especially if access to domestic capital markets is also substantially constrained. In addition, new exchange controls could impact the Province’s ability to make payments under the Notes. Increases in the federal government’s public expenditures could have a material adverse effect and longstanding negative consequences on Argentina’s economic prospects. 13 During the recent years, the federal government significantly increased its public expenditures. In 2014, the federal government registered a primary balance deficit of ARS 38.6 billion, and its public expenditures increased by 44.7% as compared to 2013, from ARS 961.8 billion in 2013 to ARS 1.39 trillion in 2014. The federal government received financial assistance from the Central Bank and ANSeS to meet its financing needs. In 2015, the primary deficit was ARS 104.8 billion. Public spending totaled ARS 1.85 trillion, a 32.6% increase when compared to 2014. The new administration has undertaken an important step to curb the fiscal deficit by reducing energy, gas and transport subsides. However, changes in these policies had a negative impact on consumer purchasing power and led to higher prices. The implementation of similar measures in the future by the new administration could increase these negative effects. Furthermore, the federal government’s primary fiscal balance could be negatively affected if public expenditures continue to increase in the future. Weaker fiscal results of Argentina could have a material adverse effect on the federal government’s ability to access long term financing and, in turn, limit the Province’s ability to access international financial markets. Possible impact of federal government measures on the provincial and federal economies. During the last few years, the federal government increased its direct intervention in the economy, including, among others, production, import and export restrictions, exchange rate and capital controls, price controls, higher tax rates and changes in the tax laws. In addition, in November 2008, the federal government enacted Law No. 26,425, which declared the nationalization of the Administradoras de Fondos de Jubilaciones y Pensiones (Pensions and Retirement Fund Administrators). In November 2012 and July 2013, the federal Congress and the executive branch set forth new rules which increased the federal government’s power of intervention in the local capital markets, such as by empowering the Comisión Nacional de Valores (National Securities Commission, or “CNV”) to appoint an official to oversee, and potentially reject, decisions adopted by the executive boards of registered companies and to suspend an executive board for 180 days until any deficiencies found are solved. In November, 2015, a federal Court of Appeal suspended these two CNV powers in the case of Papel Prensa vs. National Government -CNV. In April 2012, the federal government, pursuant to Decree No. 530/2012, ordered the temporary intervention for 30 days of YPF S.A. and sent a bill to Congress, which was approved, for the expropriation of 51% of the shares of YPF S.A. represented by Class D shares which belonged to Repsol YPF S.A. and its controlling or controlled affiliates. In February 2014, Argentina and Repsol signed the “Amicable Solution and Expropriation Agreement” to reciprocally waive their claims and to compensate the Spanish company. This agreement, which sets a compensation payable by Argentina of approximately USD 5 billion through dollar-denominated sovereign bonds, was approved by the Argentine Congress pursuant to Law No. 26,932 dated April 24, 2014. Argentina delivered the agreed amount of bonds to Repsol in May 2014, thus ending the dispute between the parties. Immediately after receiving such bonds, Repsol sold substantially all of them to JP Morgan Chase & Co. The Province cannot assure you that the federal government will not adopt other measures to increase its direct intervention in the economy in the future, such as expropriations, nationalizations, enforced renegotiations or modifications to existing contracts, new tax rules, supporting modifications to laws, rules and policies that affect the economy. If such or similar measures are adopted by the federal government, they may have a material adverse effect on the economy of Argentina and, in turn, on the Province’s economic and financial conditions, the value of its bonds and its ability to service its debt obligations, including the Notes. Argentina’s ability to obtain financing from international markets is limited, which may impair its ability to implement reforms and foster economic growth. In 2005 and 2010, Argentina conducted exchange offers to restructure part of its sovereign debt that had been in default since the end of 2001. As a result of these exchange offers, Argentina restructured over 92% of its eligible defaulted debt. Commencing in 2002, holdout creditors filed numerous lawsuits against Argentina in several jurisdictions, including the United States, Italy, Germany, and Japan. These lawsuits generally assert that Argentina failed to make timely payments of interest and/or principal on their bonds, and seek judgments for the face value of and/or accrued 14 interest on those bonds. Judgments have been issued in numerous proceedings in the United States and Germany, but to date judgment creditors have not succeeded, with a few minor exceptions, in executing on those judgments. In 2012, plaintiffs in different actions in New York, obtained a U.S. district court order enjoining Argentina from making interest payments in full on the bonds issued pursuant to the 2005 and 2010 exchange offers (“Exchange Bonds”) unless Argentina paid the plaintiffs in full, under the theory that the former payments violated the pari passu clause in the 1994 Fiscal Agency Agreement (the “FAA”) governing those non-performing bonds. The Second Circuit Court of Appeals affirmed the so-called pari passu injunctions, and on June 16, 2014 the U.S. Supreme Court denied Argentina’s petition for a writ of certiorari and the stay of the pari passu injunctions was vacated on June 18. In 2014, the federal government took a number of steps intended to continue servicing the bonds issued in the 2005 and 2010 exchange offers, which had limited success. The Macri administration engaged in negotiations with holders of defaulted bonds in December 2015 with a view to bringing closure to 15 years of litigation. In February 2016, the federal government entered into an agreement in principle to settle with certain holders of defaulted debt and put forward a proposal to other holders of defaulted debt, including those with pending claims in U.S. courts, subject to two conditions: obtaining approval by the federal Congress and the lifting of the pari passu injunctions. On March 2, 2016, the U.S. district court agreed to vacate the pari passu injunctions, subject to two conditions: first, the repealing of all legislative obstacles to settlement with holders of defaulted debt securities issued under the FAA, and second, full payment to holders of pari passu injunctions with whom the federal government had entered into an agreement in principle on or before February 29, 2016. The U.S. district court’s order was affirmed by the Second Circuit Court of Appeals on April 13, 2016. On March 31, 2016, the federal Congress repealed the legislative obstacles to the settlement and approved the settlement proposal. On April 22, Argentina issued USD 16.5 billion of new debt securities in the international capital markets, and applied USD 9.3 billion of these proceeds to satisfy settlement payments on agreements with holders. The District Court ordered the vacatur of all pari passu injunctions upon confirmation of such payments. As of the date of this offering memorandum, litigation initiated by bondholders that have not accepted Argentina’s settlement offer continues in several jurisdictions, although the size of the claims involved has decreased significantly. Although the vacatur of the pari passu injunctions removed a material obstacle to access to capital markets by the federal government, future transactions may be affected as litigation with holdout bondholders continues, which in turn could affect the federal government’s ability to access international credit markets, and thus could have a material adverse effect on the Argentine and the Province’s economies. Foreign shareholders of companies operating in Argentina have filed claims against the country at the International Centre for Settlement of Investment Disputes (“ICSID”), which have resulted and could result in arbitral awards and/or injunctions against Argentina and its assets and, in turn, limit its financial sources. Due to emergency measures adopted by the federal government during or after the 2001-2002 crisis, foreign shareholders of companies operating in Argentina have commenced arbitration proceedings against Argentina before ICSID. In April 2015, ICSID ruled that Argentina has to pay to Suez, Sociedad General de Aguas de Barcelona S.A., and Vivendi Universal S.A. approximately USD 405 million as a result of a terminating a concession agreement with Aguas Argentinas S.A. Ongoing claims before the ICSID could lead to new judgments against Argentina, which could have a material adverse effect on Argentina’s economy and financial resources, and, in turn, affect the Province’s economy and financial condition. Any revisions to the Province’s official financial or economic data resulting from a subsequent review of such data by the Provincial Office of Statistics or any other provincial entity could reveal a different economic or financial situation in the Province, which could affect your evaluation of the market value of the Notes. Certain financial, economic and other information presented in this offering memorandum may subsequently be materially revised to reflect new or more accurate data as a result of the review by the Provincial Office of Statistics or any other provincial entities that review the Province’s official financial and economic data and statistics. These revisions could reveal that the Province’s economic and financial conditions as of any particular date are significantly 15 different from those described in this offering memorandum. These differences could affect your evaluation of the market value of the Notes. Information included in this offering memorandum regarding provincial GDP estimations for 2015 is based on unofficial calculations made by the Province and, therefore, they may differ substantially from official GDP information calculated pursuant to its new methodology for those years once it is published by the Provincial Office of Statistics. As of the date of this offering memorandum, the Province has official GDP information, as elaborated by the Provincial Office of Statistics, through the year ended December 31, 2014. The Provincial Office of Statistics is working on implementing a new methodology and base year to calculate provincial GDP for 2015, following the changes made by INDEC at the national level (see “The Provincial Economy—Federal Gross Domestic Product 20132014”), and currently does not have official provincial GDP estimations for 2015. Information included in this offering memorandum regarding provincial GDP estimations for 2015 is based on unofficial calculations made by the Province, applying estimates of inflation and growth for 2015 to the current provincial GDP for 2014 . The Province cannot assure you when the Provincial Office of Statistics will release official provincial GDP information for 2015 pursuant to its new methodology, or whether, once released, such information will be similar to the provincial GDP unofficial calculations for 2015 included in this offering memorandum. Some national and international economic agents have expressed their concerns about the accuracy of the INDEC’s CPI and other economic data published by INDEC in the past. Following the 2015 Presidential elections, the Macri administration appointed Mr. Jorge Todesca, previously a director of a private consulting firm, as head of the INDEC. INDEC is expected to implement certain methodological reforms and adjust certain macroeconomic statistics. On January 8, 2016, Decree No. 55/16 was issued by the Argentine government declaring a state of administrative emergency on the national statistical system and on the official agency in charge of the system, the INDEC, until December 31, 2016. Following the declaration, the INDEC suspended publication of certain statistical data until a reorganization of its technical and administrative structure is performed in order to supply adequate and reliable statistical information. However, during the implementation of these reforms, INDEC will use official CPI figures and other statistics published by the Province of San Luis and the City of Buenos Aires. Despite these expected reforms, there is uncertainty as to whether official data will be sufficiently corrected, how fast and to what extent INDEC can regain its credibility and within what time period such data will be corrected, and what effect these reforms will have on the Argentine economy. The Province cannot make any assurances that controversies will not arise in the future regarding the inflation rate calculation methodology. Growth rates in developing economies tend to be very volatile. A sudden and significant decline in the growth rate of the Province could have a material adverse effect on the Province’s public finances and its ability to service its debt obligations, including the Notes. The economy of the Province, in line with the economy of Argentina, has experienced significant volatility in recent decades, including numerous periods of low or negative growth and high and variable levels of inflation and devaluation. The Province’s economy recovered significantly from the most recent domestic economic crisis (which reached its peak in 2001 and 2002) and experienced steady real GDP growth from 2005 to 2008, registering a cumulative average growth of 9.0% during that period. However, volatile economic activity declined by 3.3% in 2009, mainly due to the global financial crisis. The Province’s economy has recovered since then, although the Province cannot assure you that growth rates will not fluctuate significantly in the future. Economic growth is dependent on a variety of factors, including (but not limited to) economic growth in Argentina’s main trading partners, the stability and competitiveness of the peso against foreign currencies, confidence among provincial consumers and foreign and domestic investment in the Province. In most cases, these factors are outside the control of the Province. If the Province’s economic growth slows, stops or contracts, the Province’s revenues may decrease significantly, the market price of the Notes may be adversely affected and the Province’s ability to service its public debt, including the Notes, may be materially adversely affected. 16 The federal government has begun to implement significant measures to solve the current energy sector crisis, but the eventual outcome of such measures is unknown. Economic policies since the 2001-2002 crisis had an adverse effect on Argentina’s energy sector. The failure to reverse the freeze on electricity and natural gas tariffs imposed during the 2001-2002 economic crisis created a disincentive for investments in the energy sector while the federal government subsidized energy consumption. The policy caused production of oil and gas and electricity generation, transmission and distribution to stagnate while consumption continued to rise. To address energy shortages starting in 2011, the federal government increased imports of energy, with adverse implications for the trade balance and the international reserves of the Central Bank. In response to the growing energy crisis, the Macri administration declared a state of emergency with respect to the national electricity system, which will be in effect until December 31, 2017. The state of emergency allows the federal government to take actions designed to stabilize the supply of electricity to the country, such as instructing the National Ministry of Energy and Mining to design and implement, with the cooperation of all federal public entities, a coordinated program to guarantee the quality and security of the electricity system. In addition, the new administration announced the elimination of certain energy subsidies currently in effect and significant adjustments to electricity rates to reflect generation costs. Additionally, the Macri administration announced the elimination of some subsidies to natural gas and adjustment to natural gas rates. Further reductions in subsidies and increases in the price of gas came into force in April 2016. Certain provincial governments, municipalities, hospitals, companies and residents, among others, have filed claims with the National Ministry of Energy and Mining and with competent courts, against the new electricity and gas tariffs, arguing, in general, that the increased tariffs are arbitrary, illegal and/or unconstitutional. In some cases, courts hearing the cases have favored claimants demands and ordered public services providers to suspend the application of the new tariffs. For example, on March 31, 2016, a court in La Plata ordered the suspension of new tariffs applied by four electricity distribution companies operating on the Province, which tariffs had been authorized pursuant to a resolution issued by the Ministry of Infrastructure and Public Service. The federal government has been holding formal meetings with several provinces to assess the situation and the impact that the rise in electricity and gas tariffs may have on their economic and financial situation. As a result of those meetings, an understanding has been recently announced by the federal government with respect to natural gas and electricity involving limitations to the increase in tariffs and the establishment of differential rates or discounts in certain cases. The Macri administration has taken steps and announced measures to address the energy sector crisis while taking into consideration the implications of these price increases for the poorest segments of society, approving subsidized tariffs for qualifying users. A failure to address the negative effects on energy generation, transportation and distribution in Argentina resulting in part from the pricing policies of the prior administrations could weaken confidence in and adversely affect the Argentine economy and financial condition, and adversely affect the Province’s economy. There can be no assurance that the measures adopted by the new administration to address the energy crisis will be sufficient to restore production of energy in Argentina within the short or medium term. The Province’s economy remains vulnerable to external shocks that could be caused by significant economic difficulties of Argentina’s major regional trading partners or by more general “contagion” effects, which could have a material adverse effect on the Province’s economic growth and its ability to service its public debt. Weak, flat or negative economic growth of any of Argentina’s major trading partners, such as Brazil, could adversely affect Argentina’s and the Province’s economy. Although the Province’s exports reach more than 100 countries, Brazil is the Province’s largest export market. The Brazilian economy contracted by 4.1% during 2015, mainly due to a 8.3% decrease in industrial production. In addition, as of December 31, 2015, the Brazilian currency (the “Real”) exchange rate was approximately 4 Reals per USD 1.00, reflecting a 48.3% devaluation in 2015, as compared to a 13.0% devaluation in 2014. Furthermore, Brazilian inflation for 2015 reached 10.7%, despite the Brazilian government having established a 4.5% inflation target for that year. During 2015, Brazilian demand for provincial exports decreased 27.7%, or USD 2.49 billion, as compared to 2014. The Province cannot assure you that the Brazilian demand for provincial exports will not continue to decrease. A further decline in Brazilian demand for imports could have a material adverse effect on the Province’s economic growth. 17 The Province’s economy may be affected by “contagion” effects. International investors’ reactions to events occurring in one emerging market country sometimes appear to follow a “contagion” pattern, in which an entire region or investment class is disfavored by international investors. Argentina, including the Province, could be adversely affected by negative economic or financial developments in other emerging market countries. In the past, the Province has been adversely affected by such contagion effects on a number of occasions, including the 1994 Mexican financial crisis, the 1997 Asian financial crisis, the 1998 Russian financial crisis, the 1999 devaluation of the Brazilian real and the 2001 collapse of Turkey’s fixed exchange rate regime. The Province cannot assure you that similar events in the future will not have an adverse effect on its economic growth and its ability to service its public debt, including the Notes. The Province may also be affected by conditions in developed economies, such as the United States, that are significant trading partners of Argentina or have influence over world economic cycles. For example, if interest rates increase significantly in developed economies, including the United States, Argentina and its emerging markets trading partners, such as Brazil, could find it more difficult and expensive to borrow capital and refinance existing debt, which could adversely affect economic growth in those countries. A decline in international prices for the Province’s principal commodity exports could have a material adverse effect on the Province’s economy and public finances. Historically, the commodities market has been characterized by high volatility. During recent years, the prices of most of the Province’s commodities exports suffered a high degree of volatility. Commodities have significantly contributed to the federal government revenues during the recent years. Consequently, the Argentine economy has remained relatively dependent on the price of its main agricultural exports, mostly soy, which in turn have rendered the Argentine economy more vulnerable to commodity prices fluctuations. In particular, a strong decline in commodity prices may adversely affect the provincial economy and its public finances, directly and indirectly through lower export taxes collected by the federal government, which may cause a decrease in export tax revenues shared with the Province. In addition, the Macri administration has eliminated export taxes on many agricultural products, and it reduced from 35% to 30% export taxes on soy. The Province cannot assure you that the federal government may implement a new reduction on export taxes in the future, which may cause an additional decrease in export tax revenues that the federal government shares with the Province. A significant depreciation of the currencies of the Province’s trading partners or trade competitors may adversely affect the competitiveness of provincial exports and cause an increase in provincial imports, thus adversely affecting the Province’s economy. The depreciation of the currencies of one or more of the Province’s trading partners or trade competitors relative to the peso may result in provincial exports becoming more expensive and less competitive. It may also cause an increase in relatively cheaper imports. A decrease in exports and an increase in imports may have a material adverse effect on the Province’s economic growth, its financial condition and the ability of the Province to service its debt obligations, including the Notes. Fluctuations in the value of the peso could have an adverse effect on the Province’s economy and its ability to service its debt obligations. A nominal depreciation of the peso would increase the cost of servicing the Province’s public debt, while a real appreciation in the value of the peso could make exports from the Province less competitive with goods from other countries and lead to a decrease in exports from the Province. Because the Province’s exports represent a material portion of the Province’s GDP, decreased export earnings could have a material adverse effect on the Province’s economic growth and its ability to service its debt obligations, including the Notes. During the last eight years, the peso has depreciated significantly against the U.S. dollar. Any further significant depreciations or appreciations of the peso could have a material adverse effect on the Argentine and provincial economies and the Province’s ability to service its debt obligations, including the Notes. The intervention of the Central Bank in the foreign exchange market, aimed at counteracting sharp shifts in the value of the peso, may affect the level of international reserves and a significant depreciation or appreciation of 18 the peso could have an impact on the Argentine and provincial economies and the Province’s ability to service its debt obligations. During the recent years, the Central Bank has regularly intervened in the foreign exchange market in order to manage the currency and prevent sharp shifts in the value of the peso. Purchases of pesos by the Central Bank could cause a decrease in the international reserves of the Central Bank. A significant decrease in the Central Bank’s international reserves may have an adverse impact on Argentina’s and the Province’s ability to withstand external shocks to the economy. Since the new Macri administration came into office, the Central Bank has reduced significantly its interventions in the foreign exchange market, although the Province cannot assure you that further interventions will not be imposed in the future. Additionally, the level of international reserves deposited with the Central Bank significantly decreased from USD 47.4 billion as of November 1, 2011 to USD 30.4 billion as of May 27, 2016, resulting in a reduced capacity of the Argentine government to intervene in the foreign exchange market. The Central Bank recently took steps to increase the level of international reserves through the execution of certain agreements with several Argentine and foreign entities. The Province cannot assure you the extent to which this measure will effectively maintain an adequate level of international reserves and what effects a decline in international reserves may have on the provincial economy. After several years of variations in the nominal exchange rate, in 2012, there was a devaluation of approximately 14% of the peso against the U.S. dollar. This was followed by a further devaluation of the peso against the U.S. dollar that exceeded 30% in 2013 and 2014, including a loss of approximately 24% in January 2014. In 2015, there was a devaluation of approximately 52% of the peso against the U.S. dollar, including a 10% devaluation from January 1, 2015 to September 30, 2015 and a 38% devaluation in the last quarter of 2015, which was mainly experienced after December 16, 2015, as a consequence of a significant economic reform implemented by the new administration. The Province cannot assure you that the peso will not devalue further or appreciate significantly in the future. A significant depreciation of the peso would, among other effects, increase the cost of servicing the Province’s foreign-currency denominated public debt. A significant appreciation in the value of the peso could, among other effects, make provincial exports less competitive with goods from other sources. Either a significant depreciation or appreciation could have a material adverse effect on the Argentine and the provincial economy and the Province’s ability to service its debt obligations, including the Notes. In the event of another economic crisis, the federal government could impose exchange controls and transfer restrictions, which could have a material adverse effect on provincial private and public sector economic activity. From 1985 to 1991 and again following the 2001 economic crisis, the Central Bank imposed exchange controls and transfer restrictions. Recently, the new administration lifted most such controls and restrictions. However, there can be no assurance that the federal government will not impose exchange controls and/or transfer restrictions in the future, which could have a material adverse effect on the Province’s private and public sector activity. Liquidity or other problems faced by Banco Provincia may have an adverse effect on the Province’s economic growth and cause the Province to incur extraordinary, unbudgeted expenditures. Banco Provincia has historically been one of the largest financial institutions in Argentina and a major source of financing for consumers and businesses in the Province. During Argentina’s 2001 economic crisis, Banco Provincia’s liquidity was significantly reduced as a result of the run on deposits and its inability to attract new deposits following the federally mandated freeze on deposits, as well as the increase in its portfolio of non-performing loans. In addition, following the crisis, Banco Provincia’s asset portfolio reflected a substantial exposure to debt instruments of the federal and provincial government, which has gradually declined over time. As of the date of this offering memorandum, such assets are within the limits provided by the Central Bank. Many of these assets are recorded at their technical value, which is calculated according to regulations of the Central Bank. If these assets were carried at their market value, Banco Provincia would have recorded a decrease in its net assets at December 31, 2015. Although Banco Provincia’s liquidity has improved since 2005 due to Argentina’s economic recovery, if Banco Provincia were to 19 experience further liquidity or other problems, the amount of financing available to the private sector might be reduced, which could adversely affect the Province’s economic growth. In addition, pursuant to provincial legislation, the Province is the guarantor of all liabilities of Banco Provincia, including deposits and indebtedness. While Banco Provincia’s deposits are also guaranteed by the federal deposit insurance system, Banco Provincia’s indebtedness does not benefit from any other guarantee, and, as result, the Province could be required to make payments to Banco Provincia’s creditors if Banco Provincia fails to meet its payment obligations to these creditors. In the past, the Province has made contributions and provided support to, and entered into transactions with Banco Provincia to ensure the solvency of, Banco Provincia. The Province cannot assure you that it will not be required to provide further financial or other support to Banco Provincia, which could lead to substantial unbudgeted expenditures and liabilities, undermine the Province’s public finances and adversely affect its ability to service its debt obligations, including the Notes. Risks Relating to the Notes The Notes are subject to restrictions on resales and transfers. The Notes have not been registered under the Securities Act or any state securities laws and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws. Accordingly, the Notes may be offered and sold only (a) to “Qualified Institutional Buyers” (as defined in Rule 144A under the Securities Act) in compliance with Rule 144A; (b) pursuant to offers and sales that occur outside the United States in compliance with Regulation S under the Securities Act; (c) pursuant to an exemption from registration under the Securities Act; or (d) pursuant to an effective registration statement under the Securities Act, in each case in accordance with any applicable securities laws of any state of the United States or any other jurisdiction. For certain restrictions on resale and transfer, see “Plan of Distribution” and “Notice to Investors.” There can be no assurances that the credit ratings granted to the Notes to be issued under this offering memorandum may not be downgraded, suspended or cancelled by the rating agencies. Any credit rating granted to the Notes to be issued under this offering memorandum may change following its issuance. Such credit rating is limited in its scope and does not consider all of the risks related to the investment in the Notes. The credit rating only reflects the considerations that were taken into account at the moment of issuing such credit rating. There can be no assurances that such credit rating be maintained for a certain period of time or that such credit rating may not be downgraded, suspended or cancelled upon the credit rating’s consideration or if circumstances will so require. Any credit rating downgrade, suspension, or cancellation may have an adverse effect on the market price and the negotiation of the Notes. There is no prior market for the Notes; if one develops, it may not be liquid. In addition, a listing of the Notes on a securities exchange cannot be guaranteed. There currently is no market for the Notes. The Province cannot promise that such a market will develop or if one does develop, that it will continue to exist. If a market for the Notes were to develop, prevailing interest rates and general market conditions could affect the price of the Notes. This could cause the Notes to trade at prices that may be lower than their principal amount or their initial offering price. In addition, although application will be made to list the Notes in the Luxembourg Stock Exchange, the MERVAL and the MAE and to trading on the Euro MTF Market, the Notes issued hereby may not be so listed and traded. Moreover, even if a tranche of Notes is so listed and traded at the time of issuance, the Province may decide to delist the Notes and/or seek an alternative listing for such Notes on another stock exchange, although there can be no assurance that such alternative listing will be obtained. It may be difficult for you to obtain or enforce judgments against the Province. The Province is a political subdivision of a sovereign entity. Consequently, while the Province has irrevocably submitted to the jurisdiction of U.S. state or federal courts sitting in the Borough of Manhattan, the City of New York, with respect to the Notes, which are governed by New York law, it may be difficult for holders of Notes or the trustee in 20 respect of the Notes to obtain or enforce judgments of courts in the United States or elsewhere against the Province. See “Enforcement of Civil Liabilities.” If holders of Notes obtained a foreign judgment against the Province, it may be difficult for holders to have that judgment recognized and enforced in Argentine courts in light of the March 6, 2014 decision of the Supreme Court of Argentina in Claren Corporation vs. Estado Nacional. In that case, the Supreme Court of Argentina held that the enforcement of a foreign judgment sought by Claren Corporation did not satisfy one of the requirements set forth in the Code of Civil and Commercial Procedure of Argentina (i.e., that a foreign judgment cannot contravene Argentine law principles of public policy), given the fact that an enforcement, as such requested by the plaintiff, would imply that such plaintiff, pursuant to an individual action filed before a foreign court, would circumvent the public debt restructuring process set forth by the federal government through emergency legislation enacted in accordance with the Argentine Constitution. In addition, the Supreme Court of Argentina held that such norms were part of Argentine public policy and, therefore, that the enforcement of a foreign judgment as the one sought by the plaintiff could not be granted as it would be clearly contrary to such legislation. The Province cannot assure you that you will be able to obtain or enforce judgments against the Province, including with respect to the Notes. The Notes will contain provisions that permit the Province to amend the payment terms of the Notes without the consent of all holders. The Notes will contain provisions regarding voting on amendments, modifications and waivers which are commonly referred to as “collective action clauses.” Under these provisions, certain key terms of the Notes may be amended, including the maturity date, interest rate and other payment terms, without your consent. 21 USE OF PROCEEDS The gross proceeds from our sale of the Notes will be USD 1,000,000,000, before deducting commissions and estimated offering expenses payable by us. The Province intends to use the net proceeds to fund social, infrastructure and other public investment projects currently under way or that are planned to be carried out during 2016, as well as to improve the debt maturity profile of the Province and make debt service payments. In addition, 11.66% and 5.0% of the proceeds will be directed to the Fondo para Infraestructura Municipal (Municipal Infrastructure Fund) and to the Fondo Municipal de Fortalecimiento de la Seguridad y otros servicios asociados (Safety Strengthening and other associated services Municipal Fund), respectively, in accordance with articles 33, 34 and 35 of the 2016 Budget Law. 22 THE PROVINCE OF BUENOS AIRES General The Province is the largest of the 23 provinces of Argentina with an area of 304,907 square kilometers. It is located in the central-eastern part of the country. It has a coastline of approximately 1,800 kilometers, including its shoreline on the Río de la Plata (River Plate), and encompasses mild-climate, fertile agricultural areas suitable for raising cattle and a wide variety of agricultural activities. In addition, the Province is the most industrialized area of Argentina. The capital of the Province is the city of La Plata. With approximately 15.6 million inhabitants according to the results from the National Census of Households and Population conducted in October 2010, the Province’s population represents approximately 38.9% of the total population of Argentina. Approximately 63.5% of the Province’s population is concentrated in the Conurbano Bonaerense. The City of Buenos Aires is not part of the Province. Constitutional Framework and Relationship between Federal and Provincial Governments The Argentine federal constitution sets forth a division of powers between the federal and provincial governments. Each province has its own constitution, which establishes its governmental structure and provides for the election of a provincial Governor and Vice Governor and a provincial legislative branch. The provinces have general jurisdiction over matters of purely provincial or local concern, including, among others: • healthcare and education, • provincial police and courts, and • the borrowing of money on its own credit, subject to a federal approval and control mechanism. The jurisdiction of the federal government is limited to those matters that are expressly delegated to it by the federal constitution. These areas include, among others: • the regulation of trade and transport, • the issuance of currency, • the regulation of banks and banking activities, • national defense and foreign affairs, and • customs and the regulation of shipping and ports. The federal government does not guarantee, nor is it responsible for, the financial obligations of any province. Under the Argentine federal system, each province retains significant responsibility for the rendering of public services and other functions within its territory that require public expenditure, while relying primarily on a centralized tax collection system run by the federal government as a source of public revenues. This centralized system, which is called the federal tax co-participation regime, dates back to 1935, when the provinces agreed to delegate their constitutional power to collect several categories of taxes to the federal government in exchange for transfers of a portion of the related tax revenues. This coordinated taxation regime has been amended several times and, currently, the “shared” or “co-participated” taxes include income tax, value-added tax, a tax on financial transactions and several specific excise taxes levied on consumption. See “Public Sector Finances—Main Sources of Revenues—Federal Tax Co-Participation Regime.” Political Parties Historically, the main traditional political parties were the Partido Justicialista (Justicialist Party, or “PJ”) and the Unión Cívica Radical (Radical Civic Union, or “UCR”). Recently, in order to run for the past elections which were 23 held in 2015, several new coalitions were created, among which is Cambiemos led by Mauricio Macri, the current president of Argentina. The Cambiemos coalition’s main party is Propuesta Republicana (Republican Proposal or “PRO”) which was founded in 2005 as an alliance for the national legislative elections of that year, following an electoral agreement among several political parties including, among others, the UCR, the Coalición Cívica party and Argentinos por una República de Iguales(“ARI”) party. Other nationally significant political parties include: • Frente para la Victoria (Front for Victory) (“FPV”), founded in 2003 by former President Néstor Kirchner with the support of a group of governors and members of the PJ. FPV sought to attract voters from other political parties that had historically been disinclined to support the PJ. The FPV governed Argentina from May 25, 2003 until December 9, 2015. • Generación para un Encuentro Nacional (Generation for a National Encounter, or “GEN”), founded in 2007 and currently led by Margarita Stolbizer. • Frente Amplio Progresista (Progressive Front, or “FAP”), a coalition formed by a series of small political parties. Hermes Binner ran for President, whereas Margarita Stolbizer ran for Governor of the Province of Buenos Aires in the elections of 2011. • Frente Renovador (Renewal Front, or“FR”), founded in 2013 by Sergio Massa as a split-off from the PJ, in the Province of Buenos Aires, together with a number of other mayors, to participate in the obligatory, simultaneous and open primary elections held on August 2013 and in the mid-term elections held in October 2013. For the 2015 presidential elections, the FR and the former governor of the province of Córdoba, Juan Manuel de la Sota, formed the Unidos por una Nueva Alternativa (“UNA”) coalition. On October 25, 2015, presidential and congressional elections took place in Argentina. Daniel Scioli (FPV) obtained 37.08% of the votes, Mauricio Macri (Cambiemos coalition) obtained 34.15% of the votes and Sergio Massa (FR) obtained 21.39% of the votes. Based on these results, a presidential run-off between Daniel Scioli and Mauricio Macri was held on November 22, 2015,electing Macri, with 51.34% of the votes, as the successor to former President Cristina Fernández de Kirchner. Provincial Government Executive Branch The executive branch consists of a Governor and a Vice Governor, who are elected together for a maximum of two consecutive four-year terms, and a number of ministries and secretariats. The Governor has the power to appoint and remove ministers. The Governor also appoints, subject to confirmation by the provincial senate (the “Senate”), the General Provincial Attorney, the President of the Audit Tribunal and the president of Banco Provincia, among others. The Governor also presents the state of public accounts of the previous fiscal year and budget bills before the provincial legislative branch. On August 9, 2015, the open, simultaneous and mandatory primary elections (the “PASO”) were held to nominate candidates within each of the political parties that participated in the general elections for Governor held on October 25, 2015. The FPV obtained 40.34% of the total vote, followed by Cambiemos and UNA, with 29.43% and 19.55%, respectively. Aníbal Fernández, representing the FPV, obtained 52.47% of the votes registered for this party and was therefore nominated to run for Governor of the Province. María Eugenia Vidal, representing Cambiemos, and Felipe Solá, representing UNA, were the only candidates for their respective coalitions. The general presidential and provincial elections were held on October 25, 2015. María Eugenia Vidal was elected governor with 39.49% of the total vote, defeating the FPV’s candidate, Aníbal Fernández, who obtained 35,18% of the total vote. María Eugenia Vidal, has been in office since December 2015 and her current term ends in 2019. The Vice Governor is Daniel Salvador, also a member of the Cambiemos coalition, who has been in office since December 2015 and whose current term also ends in 2019. The next elections for governor will take place in 2019. 24 The executive branch carries out its duties with the assistance of ministers, whose powers are provided by Law No. 14,803, which was approved in December 10, 2016. The Province’s organizational structure is comprised of the following ministries: Ministry of Coordination and Public Administration, Ministry of Economy, Ministry of Government, Ministry of Justice, Ministry of Security, Ministry of Production, Science and Technology, Ministry of Agricultural Affairs, Ministry of Health, Ministry of Infrastructure and Public Services, Ministry of Social Development and Ministry of Labor. Legislative Branch The legislative branch is composed of two bodies: the Senate, composed of 46 members, and the House of Deputies, composed of 92 members. The Vice Governor serves as President of the Senate. The members of both bodies are elected to four-year terms by popular vote. Half of the members of each of these bodies face election every two years. The tables below show, by political party, the current composition of the provincial legislature after the most recent elections in 2015: Composition of the House of Deputies Parties FPV ................................................................................................ Cambiemos Buenos Aires ............................................................... Unidos por una Nueva Alternativa .................................................. Frente Amplio Progresista ............................................................... Justicialismo Bonaerense ................................................................ Frente de Izquierda y Trabajador .................................................... Unidad Popular................................................................................ Total ............................................................................................... Source: Number of Seats 36 28 20 4 2 1 1 92 % 39.1% 30.4% 21.7% 4.3% 2.2% 1.1% 1.1% 100.0% Legislature of the Province. Composition of the Senate Parties Cambiemos ........................................................................................ FPV ................................................................................................... Frente Renovador .............................................................................. Partido Justicialista............................................................................. Justicialismo Bonaerense ................................................................... GEN .................................................................................................. PJ Néstor Kirchner ............................................................................ Total .................................................................................................. Source: Number of Seats 16 8 9 9 2 1 1 46 % 34.8% 17.4% 19.6% 19.6% 4.4% 2.2% 2.2% 100.0% Legislature of the Province. Judicial Branch The judicial branch of the Province consists of trial courts, courts of appeals and the provincial Supreme Court, which have jurisdiction over civil, commercial, administrative, labor, family and criminal matters within the Province. The Supreme Court justices are appointed by the Governor and confirmed by the Senate. The Governor appoints other judges from a list of candidates proposed by the Consejo de la Magistratura (Counsel of Magistrates), with the Senate’s approval. Judges serve for life, and can be removed only by impeachment proceedings. Argentina also has a federal judiciary that has jurisdiction over federal matters within the territory of the Province. Other Agencies The provincial constitution provides for the existence of four provincial agencies that are not part of any of the three branches of government: the Contaduría General de la Provincia (General Accounting Office), the Tribunal de Cuentas (Audit Tribunal), the Tesorería General de la Provincia (General Treasury) and the Fiscalía de Estado (Attorney General’s office). All of the agencies, except the General Treasury, are part of the control system of the provincial administration set forth in Law No. 13,767 (the “Financial Administration Law”). 25 The Province’s General Accounting Office keeps books and records of the Province’s operations and administers the Financial Information System, which provides information to the public on matters relating to the budget, cash flow and property management as well as the economic, operating and financial administration of the Province and prepares the annual financial statements that are submitted to the legislative and executive branches and to the Audit Tribunal. The General Accounting Office also internally controls the financial and economic administration of the provincial public sector. The Audit Tribunal examines the investment and collection accounts on public revenues, both provincial and municipal, approving or rejecting them, and also holds public servants accountable when appropriate. The Attorney General’s office represents the Province in any lawsuits that could affect the Province’s assets and reviews and oversees the legal aspects of the activities of the executive branch. The Attorney General’s office also has the authority to challenge in court any provincial laws or decrees that it considers unconstitutional. The Attorney General is appointed for life by the Governor and confirmed by the Senate, and may be removed from office only through impeachment. Hernán Rodolfo Gomez is the current Attorney General. The Province’s General Treasury makes payment orders that have been previously authorized by the General Accounting Office and manages the Province’s bank accounts, all of which are held at Banco Provincia in accordance with the Financial Administration Law. Municipalities The Province is divided into 135 municipalities, several of which are more populous than some Argentine provinces. The general administration of each municipality is carried out by its Mayor. In addition, each municipality has its own legislature, which passes ordinances on organizational and technical matters relating to the administration of each municipality. Each municipality is in charge of providing basic local services such as water, sewerage, street lighting and first aid services, which are financed in part by municipal tax revenues. The Province is responsible for the financing of services related to health care, education and security. Pursuant to provincial co-participation law, the municipalities receive, in the aggregate, 16.14% of provincial taxes collected by the Province such as non-decentralized gross revenue tax, urban real estate tax, non-decentralized automobile tax, stamp tax and federal co-participation transfers. The overall percentage of funds transferred by the Province to its municipalities and the portion of such funds to be allocated to each municipality are determined and may be modified by the provincial legislature. In 2003, pursuant to the collection and tax administrative decentralization law, the Province transferred to its municipalities the administration of a number of taxes, such as rural real estate taxes, certain gross revenue taxes and certain automobile taxes. A portion of the revenues from these taxes is allocated to the Province based on criteria that vary for each tax. Another portion of such revenues is allocated to the municipalities as compensation for their tax collection and administration services. The remaining revenues are allocated to social programs and environmental sanitation, as well as to the maintenance of roads and schools. 26 THE PROVINCIAL ECONOMY Introduction Historically, the economy of the Province has represented a significant part of the overall Argentine economy, tracking Argentina’s growth and recessionary cycles. After the Argentine crisis of 2001-2002, the Province experienced a period of economic growth until 2008, which was reflected in both provincial GDP growth and level of economic activity indicators. Provincial GDP increased on average 9.9% over the 2003-2008 period. The recovery brought about higher employment rates and increased wages. The unemployment rate and the poverty rate in Greater Buenos Aires fell between 2005 and 2008 from 12.1% to 8.5% and from 36.9% to 17.8%, respectively, in accordance with INDEC. In 2009, economic activity in the Province fell by 3.3% in real terms, as a result of the impact caused by the international economic downturn. The Province experienced a 26.4% contraction in international trade in 2009 compared to the previous year, which had a significant impact on growth. In addition, a severe drought affected the Province that same year. At the provincial level, labor indicators reflected the impact of this situation on the job market, showing an increase in unemployment to 10.1% in 2009. In 2010 and 2011, the provincial GDP grew, in real terms, by 13.6% and 10.8%, respectively. Part of the growth in 2010 was due to the performance of the agricultural sector, which grew by approximately 54.0%, and the manufacturing sector, which grew by 17.2%. The manufacturing sector accounts for slightly more than a quarter of provincial GDP. The performance of the Province’s exports was also positive, growing at approximately 25.0% in each of 2010 and 2011. This increase was partially due to the growth of Brazil, a major trading partner of the Province. In 2012 and 2013, provincial GDP growth slowed to 2.9% and 3.5%, respectively, against the backdrop of a deepening economic slowdown in the region and slower growth of the major economies of the world. In 2014, the provincial GDP grew, in real terms, by 0.4%. This slight growth acceleration was mainly driven by the service and manufacturing sectors, particularly the communications and transport sector (3.2%) and financial intermediation (7.4%). In 2015, quarterly economic activity indicators developed by the Province, which track quarterly variations in economic activity in order to anticipate changes in annual GDP at constant prices, showed increases of 1.9% and 3.9% during the first and second quarters, respectively, in each case as compared to the same quarters of the prior year. Federal Gross Domestic Product 2013-2014 INDEC modified the methodology and base year to calculate the 2013 GDP for federal GDP at constant 2004 prices. Provincial GDP for 2013 and 2014 were calculated based on 1993 prices, accordingly, they are not comparable to the 2013 and 2014 federal GDP. For 2015 and subsequent years, the Province will use a new methodology and base year to calculate provincial GDP, which is comparable to the methodology used to calculate the federal GDP. In 2014, the total federal GDP increased by 0.4% mainly due to growth in the financial sector, which grew by 10.5% in real terms, and the agriculture, livestock, hunting and forestry sector, which grew by 5.5% in real terms, during 2014 as compared to 2013. 27 The table below sets forth the breakdown of the federal GDP for the years ended December 31, 2013 and December 31, 2014. Federal GDP by Sector 2013-2014 (1) (in millions of pesos, at constant 2004 prices) For the year ended December 31, 2013(2) 2014(2) Primary Production: Agriculture, livestock, hunting and forestry ...................................................................... Fisheries and other related services .................................................................................. Mining, oil and gas ........................................................................................................... Total Primary Production .............................................................................................. Secondary Production: Manufacturing industry .................................................................................................... Electricity, gas and water ................................................................................................. Construction ..................................................................................................................... Total Secondary Production .......................................................................................... Services: Real estate and business activities..................................................................................... Transport, storage and communications ............................................................................ Retail and wholesale commerce ....................................................................................... Educations, social and health services ............................................................................. Public Administration, defense and social security .......................................................... Financial Intermediation .................................................................................................. Hotel and restaurant services ........................................................................................... Other services .................................................................................................................. Total services .................................................................................................................. Total GDP ....................................................................................................... (1) (2) Source: Variation 47,381.6 2,155.3 26,393.1 75,930.0 50,002.2 2,181.8 26,872.6 79,056.5 5.5% 1.2% 1.8% 4.1% 172,488.6 11,902.0 36,564.5 220,955.2 170,233.9 11,954.8 36,336.4 218,525.2 (1.3)% 0.4% (0.6)% (1.1)% 86,790.7 66,259.1 129,558.1 77,740.7 31,728.7 41,186.4 20,893.5 7,718.5 461,875.8 758,760.9 86,443.1 67,265.6 124,623.7 78,969.8 32,324.1 45,512.8 21,581.7 7,765.7 464,486.5 762,068.1 (0.4)% 1.5% (3.8)% 1.6% 1.9% 10.5% 3.3% 0.6% 0.6% 0.4% In terms of producer’s prices, excluding value added taxes and import taxes. Preliminary data. INDEC. Provincial Gross Domestic Product 2010-2014 The Provincial Office of Statistics elaborates and releases the Province’s Gross Domestic Product, which shows the results of the activities of the various productive and service sectors of the Province, during a given period. The table below shows the evolution of the Province’s real GDP from 2010 through 2014: Provincial Gross Domestic Product (2010-2014) GDP (in millions of constant 1993 pesos) (2)................... Real GDP growth ............................................................. National real GDP growth ................................................ Provincial real GDP / National real GDP ......................... Population (inhabitants)(3) .............................................. Real GDP per capita (constant 1993 pesos) ...................... (1) (2) (3) Source: 2010(1) 153,454 13.6% 9.2% 36.4% 15,716,942 9,764 2011(1) 168,989 10.1% 8.9% 37.0% 15,909,607 10,622 2012(1) 174,850 3.5% 1.9% 37.3% 16,100,618 10,860 2013(1) 180,912 3.5% --------16,289,599 11,106 2014(1) 181,586 0.4% --------16,476,149 11,021 Preliminary data. Market prices, including value added tax and specific taxes. Based on the report “Provincial Population Projections by sex and age group: 2001-2015” and “Provincial Population Projections by sex and age group: 2010-2040” as published by INDEC. Provincial Office of Statistics; Ministry of Economy of the Province; INDEC. As of the date of this offering memorandum, the Province has official GDP information, as elaborated by the Provincial Office of Statistics, through the year ended December 31, 2014. As discussed above, the Provincial Office of 28 Statistics is working on implementing a new methodology and base year to calculate GDP for 2015, based in part on the changes made by INDEC at the national level, and does not currently have official GDP information for 2015. See “— Federal Gross Domestic Product 2013-2014.” The Province estimates that its GDP for 2015 amounts to approximately ARS 1,675.5 billion (at current prices), taking into account the current provincial GDP for 2014 and applying estimates of inflation and growth for 2015. The Province cannot assure you that the estimated provincial GDP information for 2015 described above will be similar to any official figure that may be released, and thus the estimated GDP for those years may differ significantly from any official GDP information, once calculated by the Provincial Office of Statistics pursuant to its new methodology. Principal Sectors of the Economy Historically, the economy of the Province has represented a significant portion of the Argentine economy, accounting for approximately 35.8% of Argentina’s GDP from 2009 through 2012. The Province’s most significant economic production sectors in 2014 (as a percentage of the Province’s total real GDP) were the following: • Manufacturing (26.9%); • Transport, storage and communications (17.9%); • Real estate and business activities (13.0%); • Retail and wholesale commerce (12.6%); • Construction (5.2%); • Education, social and health services, (5.2%); and • Agriculture, livestock, hunting and forestry (4.2%). 29 The table below shows the evolution of the Province’s real GDP by sector from 2010 through 2014. Provincial Gross Domestic Product by Sector 2010-2014(1) (in millions of Pesos, at constant 1993 prices) 2010(2) 2011(2) For the year ended December 31, 2012(2) 2013(2)(3) 2014 (2)(3) Primary Production: Agriculture, livestock, hunting and forestry ................................................. Fisheries and other related services ......... Mining, oil and gas ................................. Total Primary Production .................. 6,676 138 112 6,926 4.8% 0.1% 0.1% 5.0% 6,800 121 124 7,045 4.5% 0.1% 0.1% 4.7% 6,565 116 130 6,811 4.2% 0.1% 0.1% 4.3% 6,858 139 140 7,137 4.2% 0.1% 0.1% 4.4% 6,913 130 135 7,178 4.2% 0.1% 0.1% 4.4% Secondary Production: Manufacturing industry........................... Construction............................................ Electricity, gas and water ........................ Total Secondary Production ............. 36,340 8,069 2,845 47,254 26.4% 5.9% 2.1% 34.3% 41,227 8,828 2,999 53,054 27.3% 5.8% 2.0% 35.1% 43,820 8,857 3,086 55,763 27.9% 5.6% 2.0% 35.5% 44,811 8,823 3,163 56,796 27.5% 5.4% 1.9% 34.8% 43,834 8,526 3,146 55,506 26.9% 5.2% 1.9% 34.0% 13.2% 17.3% 12.0% 5.5% 19,247 26,355 18,822 7,771 12.7% 17.4% 12.4% 5.1% 19,872 27,436 19,726 7,873 12.6% 17.4% 12.5% 5.0% 20,833 28,324 21,489 8,222 12.8% 17.4% 13.2% 5.0% 21,231 29,230 20,637 8,406 13.0% 17.9% 12.6% 5.2% 3.2% 2.2% 1.9% 5.4% 60.7% 100.0% 4,710 3,243 3,021 7,922 91,093 151,192 3.1% 2.1% 2.0% 5.2% 60.2% 100.0% 4,755 3,562 3,177 8,322 94,722 157,296 3.0% 2.3% 2.0% 5.3% 60.2% 100.0% 4,816 3,810 3,210 8,448 99,154 163,087 3.0% 2.3% 2.0% 5.2% 60.8% 100.0% 4,932 4,093 3,346 8,624 100,500 163,185 3.0% 2.5% 2.1% 5.3% 61.6% 100.0% Services: Real estate and business activities........... 18,268 Transport, storage and communications .. 23,829 Retail and wholesale commerce .............. 16,493 Educations, social and health services .... 7,549 Public Administration, defense and social security ....................................... 4,470 Financial Intermediation ......................... 2,971 Hotel and restaurant services .................. 2,673 7,445 Other services ......................................... Total services....................................... 83,698 Total GDP .............................. 137,878 (1) (2) (3) Source: In terms of producers’ prices, excluding value added taxes and import taxes. Preliminary data. Since 2013, INDEC modified the methodology and base year to calculate the federal GDP at constant 2004 prices. Provincial GDP for 2013 and 2014 is calculated based at 1993 prices, accordingly, it is not comparable to 2013 and 2014 federal GDP. For 2015 and subsequent years, the Province will use a new methodology and base year to calculate provincial GDP, which is comparable to the methodology used to calculate federal GDP. Provincial Office of Statistics; Ministry of Economy of the Province. 30 The following table shows the evolution of the share of the Province’s GDP in the federal GDP by economic sector from 2010 through 2013, in constant 1993 prices: Share of Provincial GDP in Federal GDP by Sector 2010-2013(1) Sector Primary Production: (in millions of pesos, at constant 1993 prices) For the year ended December 31, 2010(2) 2011(2) 2012(2) 2013(2) Provincial Provincial Provincial GDP / GDP / GDP / Provincial Federal Federal Provincial Federal Federal Provincial Federal Federal Provincial GDP GDP GDP GDP GDP GDP GDP GDP GDP GDP (3) Agriculture, livestock, hunting and forestry ......... Fisheries and other related services ............................ Mining, oil and gas ............................. Total Primary Production .................. Secondary Production: Manufacturing industry ...... Construction ....................... Electricity, gas and water ... Total Secondary Production ................. Services: Real estate and business activities ..................... Transport, storage and communications ............... Retail and wholesale commerce ......................... Educations, social and health services .................. Public Administration, defense and social security............................. Financial Intermediation..... Hotel and restaurant services ............................ Other services ..................... Total services .................... Total GDP ......................... (1) (2) (3) Source: 6,676 20,046 33.3% 6,800 19,557 34.8% 6,565 17,342 37.9% 6,858 138 472 29.2% 121 511 23.6% 116 502 23.0% 139 112 5,113 2.2% 124 4,933 2.5% 130 4,980 2.6% 141 6,926 25,632 27.0% 7,045 25,002 28.2% 6,811 22,825 29.8% 7,137 36,340 8,069 2,845 67,547 23,915 10,567 53.8% 33.7% 26.9% 41,227 8,828 2,999 74,962 26,085 11,049 55.0% 33.8% 27.1% 43,820 8,857 3,086 74,660 25,396 11,583 58.7% 34.9% 26.6% 44,864 8,823 3,150 47,254 102,029 46.3% 53,054 112,096 47.3% 55,763 111,638 49.9% 56,836 18,268 52,982 34.5% 19,247 55,661 34.6% 19,769 55,860 35.4% 20,422 23,829 49,605 48.0% 26,355 54,231 48.6% 27,436 56,918 48.2% 28,324 16,493 56,245 29.3% 18,822 64,486 29.2% 19,726 65,739 30.0% 21,488 7,549 30,778 24.5% 7,771 32,216 24.1% 7,873 33,540 23.5% 8,000 4,470 3,137 18,486 17,966 24.2% 17.5% 4,710 3,402 19,220 21,441 24.5% 15.9% 4,755 3,834 20,008 25,285 23.8% 15.2% 4,816 4,063 2,673 10,180 7,445 22,735 83,865 258,976 138,045 386,637 26.3% 32.7% 32.4% 35.7% 3,021 10,964 7,922 23,560 91,251 281,779 151,350 418,877 27.6% 33.6% 32.4% 36.1% 3,177 11,137 8,322 23,864 94,891 292,350 157,465 426,813 28.5% 34.9% 32.5% 36.9% 3,210 8,448 98,773 162,746 In terms of producer’s prices, excluding value added taxes and import taxes. Preliminary data. INDEC modified the methodology and base year to calculate the 2013 GDP for federal GDP at constant 2004 prices. Provincial GDP for 2013 is calculated based at 1993 prices, accordingly, it is not comparable to 2013 federal GDP, which is not included in the table herein. For 2014 and subsequent years, the Province will use a new methodology and base year to calculate provincial GDP, which is comparable to the methodology used to calculate the federal GDP. Provincial Office of Statistics; Ministry of Economy of the Province. Manufacturing The Province’s manufacturing sector, which is highly diversified, has historically been the single largest contributor to provincial GDP. Manufactured products include refined petroleum products, cereals and food products, steel, chemicals, electrical machinery, aluminum, piping, automobiles and automobile spare parts, oil drilling tools and equipment, computer printers, cement, pharmaceuticals and textiles. 31 From 2010 through 2014, the output of the manufacturing sector increased by 20.6% while total provincial GDP increased by 18.4% during the same period. This sector represented, on average, 27.2% of total provincial GDP during this period. The sectors driving the increase in industrial activity have varied over the years. When economic activity rebounded in 2010, the manufacturing sector was instrumental to the recovery of the Province, with a 17.2% increase as compared to the previous year. Among the industrial activities, the most important contributions came from tanning and leather finishing; production of leather goods; production of basic metals; manufacture of radios, television and communications equipment; manufacture of motor vehicles, trailers and semi-trailers; and manufacture of furniture and bedding items, which collectively accounted for more than 70.0% of the increase in industrial activity as compared to the previous year. Car production in the Province reached a record high of 396,988 units in 2010. In addition, automobile plants located in the provincial territory exported 240,145 units, 77.0% of which were shipped to Brazil. The production of crude iron and primary steel grew by 41.5% and 30.4%, respectively, as compared to the previous year. In 2011, the increase in industrial activity was primarily due to an increase in clothing (26.5%); machinery and equipment (24.0%); motor vehicles, trailers and semi-trailers (23.7%); food and beverages (18.7%); basic metals (14.0%); and chemicals and chemical products (8.8%). In that year the sector, as a whole, grew by 13.4%. In 2012, the manufacturing sector recorded a 6.3% increase in activity levels, with strong growth in the manufacture of machinery and equipment (21.4%), furniture and mattresses (14.4%), products of petroleum refining (14.0%) and food and beverages (12.7%). In 2013, the manufacturing sector grew by 2.3%, mainly due to the increases in rubber and plastics (18.5%), clothing (15.3%), metal products (13.0%), textiles (9.5%) and cars (1.7%). In 2014, the manufacturing sector recorded a 2.2% decrease in activity levels, mainly due to decreases in food and beverages (2.8%), motor vehicles, trailers and semi-trailers (10.6%), clothing (9.4%) and non-metallic minerals (8.0%). Real Estate and Business Activities The real estate and business activities sector has historically been the second-most important sector to provincial GDP. This sector encompasses a wide range of services rendered to businesses and individuals, including real estate transactions, leases of machinery and equipment without operating personnel, computer services, research and development and other business and professional services. Real estate transactions, which include both, sales and rentals, account for the vast majority of the Province’s total production in this sector. From 2010 through 2014, the output of the real estate and business activities sector increased by 16.2% and represented, on average, 12.9% of total provincial GDP during this same period. Following the slowdown of 2009, in 2010 and 2011 the sector recorded a rate of growth of 4.2% and 5.4%, respectively, as compared in each case to the previous year. During 2010 and 2011, real estate services and real estate leases increased due to higher stock of housing, and the resulting greater number of leasing and property sale opportunities in the market. The sector recorded a moderate growth rate of 3.3%, 4.8% and 1,9% in 2012, 2013 and 2014 as compared to the previous year. Transport, Storage and Communications This sector includes land, air and water transportation of passengers and cargo, and postal and telecommunications services. It also includes other services rendered in connection with transportation, such as terminal and parking services, handling and storage of cargo, operation of toll road concessions and other infrastructure, and other related services. Telecommunications and freight land transportation together typically account for a vast majority of the Province’s production within this sector. 32 From 2010 through 2014, the output of the transport, storage and communications sector increased by 22.7%. The average annual growth was 5.2%. In 2010, the sector grew by 14.1% largely due to an increase in land transportation services (8.5%), rail passengers (6.5%) and bus passengers (9.0%). In turn, the number of local, interurban and mobile phone calls increased by 20.0% as compared to the previous year. In 2011, the sector grew by 10.6% mainly due to an increase of transportation services of light and heavy trucks by 6.2% and 4.4%, respectively, as well as an increase in passengers transported by buses in suburban lines by 6.0%. The sector increase was also due to a higher number of wire line local calls, which rose by 7.8%, and interurban calls, which rose by 10.7%. In turn, calls from mobile phones increased by 25.1%. In 2012, the sector grew by 4.1%. Freight services increased by 1.2% and passengers carried on suburban lines increased by 6.3%. In turn, the number of local calls from mobile phones increased by 18.5%, while the number of subscribers to cable TV service increased by 5.8%. In 2013, the sector increased by 3.2%. The cargo transport services decreased by 1.7%, while passengers carried on suburban lines fell to 5.8%. Relatedly communications, the number of local calls on mobile phones rose by 12.2%, while the number of subscribers to cable television services increased by 4.7%. In 2014, the sector increased by 3.2%. Retail and Wholesale Commerce Half of this sector’s total production is typically derived from retail sales of food, beverages and tobacco. The retail and wholesale commerce sector has traditionally represented more than one-tenth of provincial GDP. From 2010 through 2014, the output of the retail and wholesale commerce sector increased by 25.1%, and had an average annual growth of 12.6%. In 2010, the sector grew by 13.2%, mainly due to growth in retail and wholesale sales of food, beverages and household items. Also, brand-new car sales, second-hand car sales and motorcycle sales increased by 30.1%, 17.3% and 55.5%, respectively. Additionally, fuel sales grew by 8.1%. In 2011, the sector grew by 14.1%, mainly due to the growth of retail and wholesale sales of food, beverages and household items. New car sales exceeded 280,000 and second-hand cars reached 720,000, representing an increase of 29.4% and 21.2%, respectively. In 2012, the sector grew at a rate of 4.8%, mainly due to a general increase in both wholesale and retail sale of food, beverages and household items. However, sales of new and second-hand cars fell 5.0% and 0.7%, respectively. In 2013, this sector grew by 8.9%, mainly due to growth in both wholesale by 8.6% and retail sales by 9.5%. Brand new car sales exceeded 320,000 and used cars, 711,000, representing an increase of 14.2% and 3.8%, respectively. In 2014, this sector fell by 4.0% due to a 3.8% and 1.6% decrease in wholesale sales and retail sales, respectively. New car sales accounted for 220,000 vehicles and used cars accounted 622,000 vehicles, which represents a 32.9% and 12.5% fall, respectively. Motorcycles sales were 128,000 units, a 36.3% decrease when compared to the prior year. Construction Housing construction typically accounts for approximately 50.0% of the Province’s total production in this sector. The construction sector has traditionally represented around 5.0% of the Province’s real GDP. From 2010 through 2014, the output of the construction sector increased by 5.7%, registering an average annual growth of 1.4%. The sector’s share of total provincial GDP averaged 5.6% on an annual basis. 33 Activity grew by 7.6% in 2010, mainly driven by an 8.4% increase in the number of construction permits in major districts of the Province. Construction permits increased again by 13.1% in 2011, renewing the boost in this sector, which in turn grew by 9.4% as compared to the previous year. In 2012, the sector grew by only 0.3% due to a 3.0% decrease in unregistered construction and a 6.3% decrease in public construction. These losses were offset by an 8.2% increase in private construction. In 2013, construction fell by 0.4% due to a 7.3% decline in private construction and a 3.2% decline in public construction. Unregistered construction increased by 4.0%. In 2014, construction fell by 3.4% due to a 5.3% contraction in private construction, which was partially offset by a 24.9% increase in public construction. In addition, within private construction, registered construction and unregistered construction fell by 15.1% and 0.4%, respectively. As a result, cement demand fell by 4.8% and registered employment fell by 3.1%. Education, Social and Health Services The Province records together two activities: the provision of educational services, which typically represents slightly more than one half of total production of this sector, and healthcare and social services. The Province’s share of total Argentine GDP in this sector is relatively lower than the Province’s share of total Argentine population due to different cost levels among the provinces and between the provinces and the federal government. The disparity between health and social services costs is primarily attributable to greater economies of scale available to the Province for the provision of these services, leading to a lower cost per inhabitant. From 2010 through 2014, the output of the education, social and health services sector increased by 11.4%, registering an average annual variation of 2.7%. The sector’s share of total provincial GDP averaged 5.2% on an annual basis. Due to the nature of these services, and unlike in most sectors, annual variations were generally constant. In 2010, the sector recorded one of the highest growths due to increases in educational services, which was a direct result of the Province’s inclusion policies and the Universal Allowance per Child program, both of which in turn increased the number of students. Agriculture, Livestock, Hunting and Forestry Agriculture and livestock typically account for the vast majority of the Province’s total production within this sector. The Province’s main agricultural products include oil-producing crops, vegetables, soybeans and fodder. Livestock includes meat, dairy, wool and hide production. The main activities that compose this sector are cereals and oil-producing crops, which, together with livestock and dairy products, typically account for most of the Province’s production within this sector. Corn, soybeans, wheat and sunflower are the most widely produced crops. Argentina is the worldwide leader in the production of crop-derived oils and the Province is Argentina’s main producer of crop-derived oils. For the 2014/15 season, the Province’s sunflower and soybeans productions accounted for 62.3% and 31.9% of the country’s production, respectively. In addition, the Province is Argentina’s largest producer of wheat and one of Argentina’s main producers of corn. For the 2014/15 season, the Province’s wheat and corn productions accounted for the 46.4% and 26.3% of the country’s production, respectively. Further, the Province’s barley production for the 2014/15 season accounted for 88.6% of the country’s production. 34 Provincial Sown Area Structure for the 2014/2015 season Wheat 16.6% Corn 11.8% Soy 49.9% Barley 7.0% Sunflower 6.3% Others 8.4% Source: Ministry of Agroindustry of Argentina From 2010 through 2014, the output of the agriculture, livestock, hunting and forestry sector increased by 3.5%, with an average annual growth rate of 0.9%. On average, this sector represented 4.4% of the provincial GDP on an annual basis. The recovery of the sector was very important in 2010, achieving a 53.7% growth. This increase in growth was largely due to a 153.0% increase in soybean production, a 124.0% increase in corn production and a 86.0% increase in wheat production. In 2011, the sector grew by a moderate 1.9% due to increases in the production of wheat, sunflower, sorghum and corn. These increases were offset by a 9.0% decrease in soybean production. In 2012, the sector performed poorly and decreased by 3.5%, mainly due to a 19.0%, 10.4% and 7.5% decrease in the production of sunflower, corn and wheat, respectively. In 2013, the sector grew by 4.5%, mainly due to an increase in malting barley production by 20.3%, soybeans by 15.7% and corn by 10.4%; offset by decreases in the production of wheat by 57.1% and sunflower by 13.9%. Livestock fell by 5.1%. In 2014, the sector grew by 0.8%, mainly due to a 53.3% increase in wheat production and a 0.7% increase in livestock, which was partially offset by a 3.8% and 26.5% decrease in soybean and corn productions, respectively. Exports Originating in the Province In Argentina, information relating to exports is collected and released by INDEC, and is based mainly on data collected in connection with the issuance of shipping permits by the Argentine Federal Customs Bureau. Since 1995, export data has also been collected in connection with the export of goods that require no such permits, such as energy. Provincial exports include exports of all goods produced within the territory of the Province, either by growth, extraction or collection, and all goods processed or built completely in the Province, including those made entirely from raw materials produced outside of the Province and transformed within the Province into a different product (as classified under the Mercosur rules). 35 From 2010 through 2015, exports decreased by 19.0%, with significant differences in the year-on-year variations. As of December 31, 2015, exports decreased by 18.7%, as compared to 2014. In addition, the Province’s share in the total national exports during the 2010-2015 period amounted to an annual average of 33.5%. Brazil has historically been the Province’s main trading partner, representing more than, on average, 37.7% of its total exports for the 2010-2015 period and 35.1% of its total exports as of December 31, 2015. Classification of Main Exported Items The following table sets forth the breakdown of the Province’s exports by product category from 2010 through 2015. Exports by Product Category 2010 – 2015 (in millions of U.S. dollars and percentages) For the year ended December 31, 2010 Live animals .......................... Fish and seafood .................... Honey .................................... Vegetables ............................. Fruit ....................................... Cereals .................................. Seeds and oilseeds ................. Others ..................................... 2011 2013 (1) 2012 2014 (1) 2015 (1) 22 186 83 77 21 1,841 1,695 16 0.1% 0.8% 0.4% 0.3% 0.1% 8.0% 7.4% 0.1% 19 226 107 69 21 3,680 1,814 17 0.1% 0.8% 0.4% 0.2% 0.1% 13.1% 6.4% 0.1% 23 192 103 62 15 4,394 1,319 26 0.1% 0.7% 0.4% 0.2% 0.1% 16.1% 4.8% 0.1% 15 241 102 84 13 3,043 1,593 22 0.1% 1.0% 0.4% 0.3% 0.1% 12.0% 6.3% 0.1% 20 205 98 41 14 1,765 1,320 29 0.1% 0.9% 0.4% 0.2% 0.1% 7.7% 5.8% 0.1% 17 146 79 36 14 1,789 1,618 23 0.1% 0.8% 0.4% 0.2% 0.1% 9.7% 8.7% 0.1% Total Primary Products .... 3,941 Meat ....................................... 958 Processed fish and seafood .... 313 Eggs and dairy products ......... 118 Other products of animal origin ................................... 35 Dried and frozen fruit ............ 4 Coffee, tea, herbs and spices .. 6 Mill products .......................... 415 Oils and fats ........................... 814 Sugar and candy products ...... 32 Prepared vegetables ............... 152 Beverages, alcohol and vinegars ............................... 64 Food industry residue and waste .................................... 654 Hides and skins ...................... 515 Processed wood ...................... 35 526 Others ..................................... Total Manufactured Goods of Agricultural Origin ............................... 4,641 Chemical products ................. 2,362 Plastics ................................... 1,086 Rubber ................................... 287 Leather goods ........................ 31 Paper, cardboard, printing and publications ................... 205 Textile ..................................... 269 Footwear and related materials .............................. 20 Stone and plaster products ..... 134 Precious stones and metals ..... 4 Metals .................................... 1,523 Machinery and electric materials .............................. 943 Transportation materials ........ 5,379 Navigation ............................. 10 249 Others ..................................... Total Manufactured Goods of Industrial Origin ............................... 12,501 Fuel ........................................ 1,080 17.2% 4.2% 1.4% 0.5% 5,955 1,054 306 220 21.2% 3.7% 1.1% 0.8% 6,135 997 232 192 22.4% 3.6% 0.8% 0.7% 5,113 961 222 207 20.2% 3.8% 0.9% 0.8% 3,493 906 215 139 15.3% 4.0% 0.9% 0.6% 3,723 674 157 105 20.1% 3.6% 0.8% 0.6% 0.2% 0.0% 0.0% 1.8% 3.6% 0.1% 0.7% 31 6 9 497 1,375 35 188 0.1% 0.0% 0.0% 1.8% 4.9% 0.1% 0.7% 33 5 9 741 1,163 123 169 0.1% 0.0% 0.0% 2.7% 4.3% 0.5% 0.6% 28 6 10 600 691 95 232 0.1% 0.0% 0.0% 2.4% 2.7% 0.4% 0.9% 29 5 9 655 601 94 197 0.1% 0.0% 0.0% 2.9% 2.6% 0.4% 0.9% 23 4 10 596 632 94 173 0.1% 0.0% 0.1% 3.2% 3.4% 0.5% 0.9% 0.3% 73 0.3% 72 0.3% 66 0.3% 61 0.3% 70 0.4% 2.9% 2.3% 0.2% 2.3% 871 470 52 589 3.1% 1.7% 0.2% 2.1% 995 494 34 318 3.6% 1.8% 0.1% 1.2% 1,019 526 35 294 4.0% 2.1% 0.1% 1.2% 1,658 601 38 293 7.3% 2.6% 0.2% 1.3% 1,360 482 34 278 7.3% 2.6% 0.2% 1.5% 20.3% 10.3% 4.7% 1.3% 0.1% 5,776 2,670 1,269 295 33 20.5% 9.5% 4.5% 1.0% 0.1% 5,577 2,752 1,143 264 33 20.4% 10.1% 4.2% 1.0% 0.1% 4,991 2,740 1,060 258 27 19.7% 10.8% 4.2% 1.0% 0.1% 5,500 2,657 1,051 251 22 24.1% 11.7% 4.6% 1.1% 0.1% 4,693 2,492 766 172 18 25.3% 13.5% 4.1% 0.9% 0.1% 0.9% 1.2% 204 321 0.7% 1.1% 162 267 0.6% 1.0% 132 230 0.5% 0.9% 110 211 0.5% 0.9% 89 155 0.5% 0.8% 0.1% 0.6% 0.0% 6.7% 21 143 9 1,773 0.1% 0.5% 0.0% 6.3% 23 123 4 1,633 0.1% 0.4% 0.0% 6.0% 22 107 7 1,390 0.1% 0.4% 0.0% 5.5% 19 91 3 1,305 0.1% 0.4% 0.0% 5.7% 9 79 6 587 0.0% 0.4% 0.0% 3.2% 4.1% 23.5% 0.0% 1.1% 1,076 6,621 21 257 3.8% 23.5% 0.1% 0.9% 959 6,608 11 282 3.5% 24.2% 0.0% 1.0% 871 7,119 6 237 3.4% 28.1% 0.0% 0.9% 735 6,163 9 187 3.2% 27.0% 0.0% 0.8% 521 4,492 6 161 2.8% 24.3% 0.0% 0.9% 54.6% 4.7% 14,712 838 52.3% 3.0% 14,262 718 52.1% 2.6% 14,205 492 56.0% 1.9% 12,814 446 56.2% 2.0% 9,553 254 51.6% 1.4% 36 For the year ended December 31, 2010 Grease and oil lubricants ........ 88 Petroleum gas and others ....... 504 Electrical energy .................... 26 95 Other ...................................... Total Fuel and Energy....... 1,793 Total ................................. 22,877 (1) Source: 0.4% 2.2% 0.1% 0.4% 7.8% 100.0% 2011 116 592 3 139 1,689 28,132 0.4% 2.1% 0.0% 0.5% 6.0% 100.0% 2013 (1) 2012 101 454 107 1,379 27,354 0.4% 1.7% 0.4% 5.0% 100.0% 412 58 94 1,056 25,365 1.6% 0.2% 0.0% 0.4% 4.2% 100.0% 2014 (1) 44 423 72 985 22,791 0.2% 1.9% 0.0% 0.3% 4.3% 100.0% 2015 (1) 39 210 0 50 553 18,521 0.2% 1.1% 0.0% 0.3% 3.0% 100.0% Preliminary data. Provincial Office of Statistics; Ministry of Economy of the Province on the basis of information provided by INDEC. Primary Products. Exports of primary products include animals and animal products (including unprocessed seafood and fish, but not meat), honey, fruits, vegetables, cereals and seeds and oilseeds. From 2010 through 2015, these products represented an annual average of 19.3% of total provincial exports and 28.1% of total national exports in this sector. Exports of primary products decreased 5.1% from 2010 to 2015, with a very uneven year-over-year variation. In 2015, these products recorded a 6.6% increase due to a 22.6% rise in exports of seeds and oilseeds. Exports of cereals, seeds and oilseeds traditionally have accounted for the majority of provincial exports of primary products, accounting on average for 56.4% and 34.6%, respectively, of total exports of primary products from 2010 through 2015. The provincial exports of primary goods for the year ended December 31, 2015, amounted to USD 3.72 billion and represented 20.1% of the total provincial exports. Manufactured Goods of Agricultural Origin. Exports of manufactured goods of agricultural origin include meat, processed fish and seafood and other products of animal origin, processed food and vegetables, mill products, oil and fats, beverages, alcohol and vinegars, food industry residue and waste, dyes and extracts, hides and skins, processed wool and other agricultural products that have undergone some sort of processing. From 2010 through 2015, these products represented an annual average of 21.8% of total provincial exports and 20.3% of total national exports in this sector. The variation in this item, considering the period between 2010 and 2015, shows a 1.4% increase. In 2015, these exports recorded a 14.7% decrease due to a 18.0% decrease in food industry residue and waste exports and 25.6% decrease in meat exports. The most representative products of this group are meats that, on average, account for 17.8% of exports of this sector and food and industry residue and waste, that, on average, represents a 21.1% of exports of this sector. The provincial exports of manufactured goods of agricultural origin for the year ended December 31, 2015, amounted to USD 4.69 billion and represented 25.3% of the total provincial exports. Manufactured Goods of Industrial Origin. Manufactured goods of industrial origin include chemicals, plastics, rubbers, leather, paper, textiles, footwear, stone, precious stone, metals, machinery and transportation materials, navigation and other industrial goods. Manufactured goods of industrial origin are the most important provincial exports. From 2010 through 2015, these products represented an annual average of 53.9% of total provincial exports and 53.5% of total national exports in this sector. From 2010 through 2015 exports of these products decreased by 23.3%. In 2015 these exports decreased by 25.4%. The products with the highest share in this segment are land transport materials, with an average weight on total exports of 46.6%. In 2015, this share was 47.0%. Chemicals and related products come second in order of importance, with an average share of 20.4%. The provincial exports of manufactured goods of industrial origin for the year ended December 31, 2015, amounted to USD 9.55 billion and represented 51.6% of the total provincial exports. Fuel and Energy. Fuel and energy exports consist of exports of fuel, grease and lubricants, petroleum gas, electrical energy and other fuel and energy products. From 2010 through 2015, these products represented an annual average of 5.0% of the total provincial exports and 22.5% of total national exports in this sector. Exports of these products have decreased by 69.2% from 2010 to 2015. In 2015, exports of fuel and energy recorded a decrease of 68.2%. Fuel has traditionally been the most significant export item in this category with an average annual share of 50.0%, although its share was 45.9% in 2015. The provincial exports of fuel and energy for the year ended December 31, 2015, amounted to USD 0.55 billion and represented 3.0% of the total provincial exports. 37 Destination of Exports The following table sets forth the breakdown of the Province’s exports by geographic destination from 2010 through 2015. Geographic Distribution of Exports 2010- 2015 (in millions of U.S. dollars and percentages) Country Brazil .................... Chile ..................... United States ........ China .................... Uruguay................ Mexico ................. Venezuela ............. Paraguay ............... Colombia .............. Germany .............. Peru ...................... Bolivia .................. Italy ...................... Netherlands ......... Egypt ................... Russia ................... Ecuador ................ Spain .................... South Africa ......... Subtotal ........... Others ................... Total .................... (1) Source: 2010 For the year ended December 31, 2012 2013 (1) 2011 2014 (1) 2015 (1) 9,031 1,448 857 1,558 881 650 612 639 495 648 327 356 263 267 290 147 218 204 203 39.5% 6.3% 3.7% 6.8% 3.9% 2.8% 2.7% 2.8% 2.2% 2.8% 1.4% 1.6% 1.2% 1.2% 1.3% 0.6% 1.0% 0.9% 0.9% 10,224 1,636 1,017 1,724 1,107 532 678 687 652 1,047 489 432 272 397 550 171 267 324 500 36.3% 5.8% 3.6% 6.1% 3.9% 1.9% 2.4% 2.4% 2.3% 3.7% 1.7% 1.5% 1.0% 1.4% 2.0% 0.6% 0.9% 1.2% 1.8% 10,113 1,706 971 1,369 975 449 796 680 851 710 614 450 189 337 387 175 260 227 483 37.0% 6.2% 3.5% 5.0% 3.6% 1.6% 2.9% 2.5% 3.1% 2.6% 2.2% 1.6% 0.7% 1.2% 1.4% 0.6% 0.9% 0.8% 1.8% 9,790 1,527 1,034 1,472 953 516 702 719 624 434 407 378 208 269 321 166 150 187 213 38.6% 6.0% 4.1% 5.8% 3.8% 2.0% 2.8% 2.8% 2.5% 1.7% 1.6% 1.5% 0.8% 1.1% 1.3% 0.7% 0.6% 0.7% 0.8% 8,987 1,279 958 1,198 865 564 467 708 475 417 299 374 154 331 261 197 212 155 158 39.4% 5.6% 4.2% 5.3% 3.8% 2.5% 2.1% 3.1% 2.1% 1.8% 1.3% 1.6% 0.7% 1.5% 1.1% 0.9% 0.9% 0.7% 0.7% 6,499 1,150 681 1,556 726 522 425 634 261 399 247 399 109 251 196 94 111 137 234 35.1% 6.2% 3.7% 8.4% 3.9% 2.8% 2.3% 3.4% 1.4% 2.2% 1.3% 2.2% 0.6% 1.4% 1.1% 0.5% 0.6% 0.7% 1.3% 18,983 83.0% 22,707 80.7% 21,742 79.5% 20,073 79.1% 18,062 79.2% 14,631 79.0% 3,894 22,877 17.0% 100.0% 5,425 28,132 19.3% 100.0% 5,612 27,354 20.5% 100.0% 5,292 25,365 20.9% 100.0% 4,730 22,791 20.8% 100.0% 3,890 18,521 21.0% 100.0% Preliminary data. Provincial Office of Statistics; Ministry of Economy of the Province on the basis of information provided by INDEC. Historically, the main destinations for exports from the Province have been the Mercosur, the United States, China and Chile. Exports to Brazil constitute the vast majority of exports to the Mercosur, accounting for more than 80.0% of these exports in each of the last six years. Exports to Brazil, in particular, accounted for 35.1% of total exports originated within the Province in 2015, a 27.7% decrease when compared to 2014. Economically Active Population and Employment INDEC prepares a series of indexes used to measure the social, demographic and economic characteristics of the Argentine population based on data collected in the Encuesta Permanente de Hogares (Permanent Household Survey, or “EPH”). The EPH is conducted in the five main urban areas within the territory of the Province, the largest of which is the Greater Buenos Aires area, which includes the Conurbano Bonaerense. The five main urban areas located within the territory of the Province are: • Greater Buenos Aires, which contains approximately 67.0% of the Province’s population; • Greater La Plata, which contains approximately 5.0% of the Province’s population; • Mar del Plata – Batán, which contains approximately 4.0% of the Province’s population; • Bahía Blanca – Cerri, which contains approximately 2.0% of the Province’s population; and • San Nicolás –Villa Constitución, which contains approximately 1.0% of the Province’s population. Villa Constitución, which is included in this urban area, is located in the Province of Santa Fe. 38 The publication of the indexes prepared by INDEC is currently suspended, in the context of the emergency declared in the area of federal statistics. See “Emergency Declaration” below and “Risk Factors—Some national and international economic agents have expressed their concerns about the accuracy of the INDEC’s CPI and other economic data published by INDEC in the past.” The following tables set forth employment figures from 2009 through the third quarter of 2015 for the main urban areas of the Province for the periods specified. Labor Share Rate of the Main Urban Areas of the Province 2009 - the third quarter of 2015(1) (as a percentage of total population) 4Q2009 4Q2010 4Q2011 4Q2012 4Q2013 4Q2014 3Q2015 Areas of Greater Buenos Aires .......................... 47.5 46.7 46.9 47.4 45.8 44.7 44.2 Bahía Blanca – Cerri ......................................... 46.2 47.7 46.3 46.6 48.0 44.7 45.7 Greater La Plata................................................. 47.5 45.3 45.4 43.7 47.3 46.3 43.7 Mar del Plata – Batán ........................................ 47.0 41.1 49.2 41.3 48.0 40.3 45.0 40.2 47.4 38.1 44.6 40.8 44.9 39.6 San Nicolás – Villa Constitución....................... (1) Source: Calculated by dividing the portion of the population employed or actively seeking employment (“economically active population”) by the total population. INDEC. Unemployment Rate of the Main Urban Areas of the Province 2009-the third quarter of 2015 (1) (as a percentage of economically active population)(2) 4Q2009 4Q2010 4Q2011 4Q2012 4Q2013 4Q2014 Areas of Greater Buenos Aires .......................... 10.1 8.7 8.3 7.9 7.2 7.9 6.7 Bahía Blanca – Cerri ......................................... 9.5 6.9 7.8 6.6 8.7 7.5 5.7 Greater La Plata................................................. 7.6 5.7 5.6 4.9 5.2 5.5 4.2 Mar del Plata – Batán ........................................ 9.2 5.8 8.7 7.8 7.7 8.8 9.5 6.1 11.7 5.7 10.9 5.1 11.8 5.5 San Nicolás – Villa Constitución....................... (1) (2) Source: 3Q2015 Calculated by dividing the unemployed population seeking employment by the economically active population. Population employed or actively seeking employment. INDEC. Underemployment Rates of the Main Urban Areas of the Province 2009- the third quarter of 2015 (1) (as a percentage of economically active population) (2) 4Q2009 4Q2010 4Q2011 4Q2012 4Q2013 4Q2014 3Q2015 Areas of Greater Buenos Aires .......................... 7.9 5.9 7.1 7.9 5.7 7.0 6.7 Bahía Blanca – Cerri ......................................... 3.4 2.5 4.0 2.9 1.9 2.7 2.9 Greater La Plata................................................. 7.0 2.4 6.4 6.8 8.2 6.9 7.6 Mar del Plata – Batán ........................................ 8.5 4.5 5.4 6.2 9.2 5.0 9.2 4.3 6.4 2.7 7.9 2.4 8.6 2.8 San Nicolás - Villa Constitución ....................... (1) (2) Source: Calculated by dividing the portion of the population working 35 hours or less per week and with the intent to work more by the economically active population. Population employed or actively seeking employment. INDEC. In 2008, the Province created the Plan de Promoción, Preservación y Regularización del Empleo (Plan for the Promotion, Preservation and Regularization of Employment), which is aimed at incorporating vulnerable groups of the population, which are often involved in distressed situations, into the labor market and foster the creation of jobs in strategic economic sectors and geographic regions. This program is divided into the following four sub-programs: • Inclusión Laboral (Employment Opportunity) • Regularización del Empleo no Registrado (Unregistered Employee Regularization) 39 • Asistencia a la Promoción Industrial (Industrial Promotion) • Preservación de Puestos de Trabajo en Situación de Crisis (Preservation of Labor Force in Distressed Situations) Under each of these sub-programs, companies that hire or retain qualifying employees receive a fixed monthly sum of up to ARS 1,150 per employee for a period of between 6 to 24 months, depending on each sub-program. In addition, the Programa Barrios Bonaerenses (Buenos Aires Neighborhood Program), which has been in place since 2000 and was developed with the goal of improving the income of poor households by providing public service employment to heads of households over 18 years of age, is also available for qualifying unemployed individuals in the Province. The Greater Buenos Aires unemployment rate was 10.1% in 2009 due to the economic slowdown in that year. The rebound during the following periods, mainly due to the increase of industrial activity in the Province, brought unemployment in Greater Buenos Aires down to 7.9% in 2014. Poverty The Province’s only source of data relating to poverty consists of statistics compiled by INDEC as part of the EPH. Poverty indicators are calculated on the basis of a proportion of households whose income is not enough to meet a basic basket of goods and services necessary to satisfy food and nonfood essential needs. The basket is valued at market prices and the resulting threshold is called the “poverty line.” INDEC’s estimates of poverty are available through June 30, 2013, although they are affected by the same lack of credibility as its estimates of prices during the last eight years because the estimated value of market prices of the basket of goods relies on questionable data. The new administration has declared a statistical emergency to rectify this problem. See “Emergency Declaration” below. As of the date of this offering memorandum, there are no credible official estimates of poverty for Argentina or for the Province. See “Risk Factors—Some national and international economic agents have expressed their concerns about the accuracy of the INDEC’s CPI and other economic data published by INDEC in the past.” Environment In 1973, Argentina was one of the first Latin American countries to create an environmental protection agency, and in 1995, the Province created the Organismo Provincial para el Desarollo Sostenible (Provincial Organization for Sustainable Development, or “OPDS”), which is in charge of overseeing environmental issues in the Province. The OPDS conducts environmental inspections, maintains a database of licensed environmental service providers, receives citizen complaints about pollution and is involved in a wide range of environmental projects, from bio-fuel promotion, clean-up and forestry to energy efficiency. Although the Province confronts many environmental issues, including soil and air quality, the major environmental challenge facing the Province is water quality. Three water basins with significant pollution are located within the Province: the Matanza-Riachuelo River Basin, the Reconquista River Basin and the Luján River Basin. Matanza-Riachuelo River Basin This basin has suffered significant degradation as a result of many years of unplanned urban development. In addition, approximately 10,000 manufacturing facilities dump industrial waste in drainages or directly into several local rivers. Moreover, the evolution and growth of the industrial sector has not been accompanied by the necessary clean-up infrastructure investment that these activities demand. This situation has made it necessary to adopt public policies aimed at reversing the damage on the environment caused over the years. The new Autoridad de la Cuenca Riachuelo-Matanza (Authority of the Matanza-Riachuelo Basin, or “ACUMAR”) was created in December 2006 to address and monitor the environmental aspects related to the Matanza-Riachuelo River Basin. This entity is empowered to inspect, sanction and close down the companies polluting 40 the area. The ACUMAR replaced several governmental authorities and has the power and the necessary means to coordinate the large scale environmental clean-up and rational use of natural resources. In 2004, a case was brought before federal court by Beatriz Silvia Mendoza and a number of other neighbors, requesting the environmental clean-up of the basin and the creation of a special fund to finance such clean-up. In this case, the federal government, the Province and the City of Buenos Aires together with 44 other companies are charged with environmental pollution. The complaint was later extended to include 14 municipalities of the Province. In 2008, the Supreme Court of Argentina issued a ruling on the case, requiring ACUMAR to comply with a clean-up program and making the federal government, the Province and the City of Buenos Aires jointly responsible for its execution. The Supreme Court of Argentina also indicated that the governments are responsible for preventing further damage and repairing the existing damage to the basin. Accordingly, the Supreme Court of Argentina set a 90-day period for the governments involved to implement an active health plan for the areas affected by the basin pollution, and established fines for public officials who did not comply with the law. In addition, follow up and control mechanisms have been implemented to comply with the established goals, such as public hearings before the federal courts and the issuance of reports on the clean-up of the Matanza-Riachuelo River Basin. In order to comply with the Supreme Court of Argentina’s judgment, the Province; together with certain other defendants; developed the Plan Integral de Saneamiento Ambiental (Comprehensive Plan for Environmental Sanitation or “PISA”), which is a comprehensive environmental clean-up plan. The PISA was last updated in March 2010. In order to provide relevant information about the basin, as well as the progress of actions under the PISA framework, a system of indicators has been developed. Its last publication compiles the results for 2012. ACUMAR publishes on its webpage (http://www.acumar.gov.ar/indicadores/lista-completa) the updated results on each of such indicators. Reconquista River Basin The Reconquista River Basin is the second most contaminated river basin in Argentina, following the Matanza-Riachuelo River Basin. The number of urban settlements and manufacturing facilities in the nearby area has been increasing over the years without any plan or consideration of the environmental characteristics of the region. This significant concentration of people and factories has polluted the surface and underground water resources with domestic and industrial waste. In 2001, the Province created the Comité de la Cuenca del Río Reconquista (Reconquista River Basin Committee, or “COMIREC”) to oversee the work of the Unidad de Coordinación de Obras Saneamiento Ambiental y Control de las Inundaciones (Coordinating Unit for Environmental Clean-up and Flood Control Works, or “UNIREC”), which was created in 1994. In 2003 the provincial government decided to dissolve UNIREC due to lack of resources for project expenses. In November 2006, the provincial government approved a new environmental clean-up program for the Reconquista River Basin, and entrusted COMIREC with the control and monitoring of domestic and industrial pollution. In December 2014, the Province signed a loan with the IDB for USD 230 million for the integral clean-up of the Reconquista River Basin. The draft loan agreement was approved by Decree No. 965/14. Luján River Basin The Luján River Basin is the least contaminated of the three major river basins in the Province. In 2001 and 2008 the Regional Committee A, and the Regional Committee B, respectively, were created with the participation of the pertinent municipalities to oversee environmental issues affecting the Luján River Basin. The Regional Committee A maintains periodic meetings and the Regional Committee B is not yet fully operational. Floods in the Province In August 2015, heavy rains in several districts in the north, northeast and center of the Province adversely affected several reservoirs and caused major damages to homes, businesses and public buildings, among others. As a 41 result, Provincial Decree No. 618/15 extended the state of emergency declared by Decree No. 769/14 relating to several districts and declared a state of emergency in additional affected districts until February 2016. In addition, on August 26, 2015 the provincial legislature passed Law No. 14,760 which authorized the Province to obtain a financing for up to ARS 4,500 million in order to perform the necessary infrastructure works in the Lujan River Basin. This law also provides for tax benefits to the residents of the affected areas, such as exemptions to property, automobile, gross revenues and stamp taxes. On September 30, 2015, the provincial legislature passed Law No. 14,778 which authorized the Province to obtain financing for up to ARS 1,185 million to fund the second phase of the reconstruction of certain infrastructure located in the central region of the Province that was affected by the floods that took place in 2013 and fund any other measures deemed necessary to mitigate future damage resulting from heavy rainfall. On September 7, 2015, pursuant to a floods emergency assistance program between the Province and the InterAmerican Development Bank (“IDB”), the Province made a USD 200,000 non-reimbursable financing solicitation. The proceeds will be used to repair and construct floods-safeguarding barriers and clean up the drains, among other floodrelated public works. Emergency Declaration Provincial Law No. 14,806 sets forth an emergency in the areas of public security and penitentiary policy and health, which will be in force until January 2017, in order to protect the physical integrity and property of the Province’s inhabitants. Further, Provincial Law No. 14,815 declared an administrative and technological emergency in the Province, aimed at strengthening and modernizing provincial public entities. The emergency declaration is expected to last one year, with the option of a single extension for another year. Among other matters, Provincial Law No. 14,815 expedites the procedures for contracting goods and services. In addition, the federal executive branch declared an emergency of the federal electrical system until December 31, 2017 pursuant to Decree No. 134/15. The purpose of this emergency declaration is to implement a program aimed at improving the quality and safety of the supply of electricity and to guarantee the rendering of the electricity public service. See “Risk Factors—Risks relating to the Province—The federal government has begun to implement significant measures to solve the current energy sector crisis, but the eventual outcome of such measures is unknown.” Also, pursuant to Decree No. 55/16 the federal executive branch declared a state of emergency in the area of federal statistics; with the goal of providing INDEC’s new authorities with the necessary tools to address this situation. As a result of this measure, CPI will not be released in the near future. In this context, in January 2016, the INDEC started to publish as an alternative CPI, the calculations elaborated by the Dirección General de Estadística y Censos de la Ciudad Autónoma de Buenos Aires (General Directorate of Statistics and Censuses of the City of Buenos Aires) and Dirección Provincial de Estadística y Censos de San Luis (Provincial Directorate of Statistics and Censuses of the Province of San Luis). See “Risk Factors—Risks relating to the Province—Some national and international economic agents have expressed their concerns about the accuracy of the INDEC’s CPI and other economic data published by INDEC in the past.” Litigation Concession Dispute In May 1999, the Province awarded a concession to Azurix Buenos Aires (“Azurix”), an indirect subsidiary of Enron, for the provision of water and wastewater services in 48 of the Province’s municipalities. In January 2001, Azurix alleged that the Province had failed to comply with certain provisions of the concession. Following several months of unsuccessful negotiations, in October 2001 Azurix gave notice of termination of the concession to the Province and subsequently brought a claim against the Province before the provincial Supreme Court. In 2002, the Province assumed the provision of water and wastewater services in these municipalities through the newly created Aguas Bonaerenses S.A. (“Aguas Bonaerenses”), which is jointly owned by the Province (90.0%) and its employees (10.0%). 42 The parent company of Azurix, Azurix Corp., filed a request for arbitration against the federal government with the International Centre for Settlement of Investment Disputes (“ICSID”) on the grounds that Argentina had violated the 1991 Treaty Concerning the Reciprocal Encouragement and Protection of Investment between the Republic of Argentina and the United States of America, seeking approximately USD 555 million. In 2006, an ICSID tribunal rendered a decision in the arbitration proceedings in favor of Azurix Corp. and ordered the federal government to pay USD 165 million in damages. Argentina filed an application for annulment and requested that the court suspend execution of the award pending resolution of the annulment proceedings. ICSID rejected Argentina’s annulment request and affirmed its prior decision. In October 2013, the federal government settled the Azurix Corp. ICSID award. The settlement of the Azurix Corp. ICSID award was part of a larger settlement, which included four other ICSID awards against Argentina. The settlement amount was paid in sovereign bonds of Argentina (BODEN 2015 and BONAR 2017). The Province may be asked by the federal government to reimburse amounts paid by it in respect of the settlement of the Azurix Corp. ICISID award, on terms to be negotiated and mutually agreed to by the Province and the federal government. As of the date of this offering memorandum, the federal government has not requested the reimbursement of this award. Bondholder Claims There are currently 14 final and non-appealable judgments and three lawsuits pending against the Province related to the Province’s 2002 default on its bonds. These judgments and lawsuits are under three different jurisdictions: the United States of America, Germany and Switzerland. In the United States of America, there are six final and non-appealable judgments outstanding against the Province for a total principal amount of USD 424,000 and EUR 201,000 (excluding interest, costs and attorney’s fees), and one lawsuit that remains pending for a total principal amount of USD 85,000 (excluding interest, costs and attorney’s fees). In Germany, there are five final and non-appealable judgments outstanding against the Province for a total principal amount of EUR 2,484,000 (excluding interest, costs and attorney’s fees) and two pending lawsuits for a total principal amount of EUR 31,000 (excluding interest, costs and attorney’s fees). In Switzerland, there are three final and non-appealable judgments outstanding against the Province for a total principal amount of CHF 600,000 (excluding interest, costs and attorney’s fees). As of the date of this offering memorandum, no creditors who have brought legal action against the Province have succeeded in collecting on judgments entered in their favor. Provincial Enterprises The Province owns part or all of a number of different enterprises. Some of these enterprises provide traditional public services to people who live in the Province, such as Aguas Bonaerenses, which provides water services, Buenos Aires Gas S.A. (“Buenos Aires Gas”), which provides gas services, and CEAMSE, which provides garbage collection and disposal services. In addition, the Province owns 100% of Banco Provincia, which is a self-administered public bank that provides general, commercial and retail banking services in Argentina. See “Banco Provincia.” The Province also owns enterprises that compete in markets for other goods and services. The following is a description of some of the most socially and economically important enterprises owned by the Province. Aguas Bonaerenses Aguas Bonaerenses is a corporation 90% owned by the Province and 10% owned by its employees, which in 2002 assumed a water concession to guarantee and improve water rendering and sewer services across a large portion of the Province. Aguas Bonaerenses currently provides services in 91 areas across 62 regions of the Province in an area of approximately 150,000 square kilometers. Aguas Bonaerenses carries out a wide range of activities, including the purification, transportation and distribution of drinking water as well as the collection, treatment and disposal of waste water. 43 Aguas Bonaerenses’ activities are overseen and monitored by the Organismo de Control de Aguas de Buenos Aires (Water Control Entity of Buenos Aires or “OCABA”), a self-regulated regulatory authority that oversees compliance with the rules and regulations set forth in the water regulatory framework. Buenos Aires Gas Buenos Aires Gas is a corporation 51.0% owned by the Province with the remaining 39.0% and 10.0% owned by cooperatives and the municipalities, respectively. Buenos Aires Gas has as its main purpose the distribution of low, medium and high pressure natural gas; natural compressed gas; and liquefied natural gas. BAGSA also participates in the distribution and commercialization of liquefied petroleum gas. Buenos Aires Gas performs a wide range of activities such as planning, managing and implementing infrastructure works in areas that lack infrastructure or are not adequately served. In addition, Buenos Aires Gas works closely with the Province’s municipalities and cooperatives to implement projects, control engineering aspects of gas services, execute bidding processes and secure its own financing resources. Instituto Provincial de Lotería y Casinos The Provincial Institute of Lotteries and Casinos is an independent, decentralized and self-governed entity dedicated to gaming activities in the Province. Since November 2006, this entity has been implementing a new program to renew licenses granted to bingo and slot machine operators which had already expired or were scheduled to expire by 2015. As consideration for renewing licenses, operators are generally required to pay fixed sums to the Province. The Province has collected ARS 0.15 billion in 2009, ARS 0.22 billion in 2010, ARS 0.14 billion in 2011 and ARS 1.19 billion in 2012. The latter includes ARS 1 billion as a result of the renewal of some bingo halls’ licenses which are set to expire between 2013 and 2015. In 2013, the Province collected ARS 0.26 billion and collected ARS 0.35 billion in 2014. The Province has budgeted to collect ARS 0.24 billion for 2015. During the nine-month period ended September 30, 2015, the Province collected ARS 0.18 billion. Fideicomiso de Recuperación Crediticia In 2001, pursuant to a provincial law enacted to improve Banco Provincia’s balance sheet, Banco Provincia transferred approximately ARS 1,900 million in non-performing loans to the Province in exchange for a bond issued by the Province to Banco Provincia in a principal amount equal to the face value of the loans, less approximately ARS 600 million in allowances for loan losses. Banco Provincia subsequently exchanged the ARS 1.30 billion bond for Bogar in the provincial debt exchange. See “Public Sector Debt—Debt Denominated in CER-adjusted Pesos— Provincial Debt Exchange (Bogar).” In order to recover the transferred loans, the Province created, by provincial law, the Fideicomiso de Recuperación Crediticia (the Loan Recovery Committee), a provincial self-administered public entity whose members are appointed by the Governor. The Loan Recovery Committee was required to transfer all of its profits (calculated as amounts recovered on the transferred loans less the entity’s expenses) to the Province for purposes of funding a portion of the payments due by the Province to the federal government in respect of Bogar. Pursuant to Law No. 13,929 the Loan Recovery Committee was permitted to act as trustee in trust agreements with financial and other private or public institutions providing credit recovery services. In furtherance of its duty as trustee, the Committee was authorized by Law No. 14,062 (the “2010 Budget Law”), to purchase loan portfolios. As a result, certain pre-arranged loans are being negotiated between Banco Nación and producers in the agricultural sector of the Province. The 2010 Budget Law also abolished the duty described above; to apply all profits to fund payments due under the Bogar bonds as such debt has been consolidated with other provincial debts under the Federal Debt Refinancing Program. As of September 30, 2015, the Province had received ARS 1.85 billion from the Loan Recovery Committee. Astillero Río Santiago In June 1994, the federal government transferred the Astillero Río Santiago (Rio Santiago shipyard, or the “Shipyard”) to the Province in anticipation of its privatization. Despite the loss-generating nature of the Shipyard, the Province accepted the transfer and has been subsidizing its operations in order to preserve an important source of 44 employment for the city of Ensenada. This subsidy amounted to approximately ARS 0.30 billion in 2009, ARS 0.50 billion in 2010, ARS 0.62 billion in 2011 and ARS 0.63 billion in 2012. In 2013, the Province granted to the Shipyard a subsidy of ARS 0.81 billion and transferred ARS 1.15 billion in 2014. The Province has budgeted ARS 1.02 billion to be transferred to the Shipyard in 2015. During the nine-month period ended September 30, 2015, the Province transferred ARS 1.00 billion to the Shipyard. The Province does not have any current plans to privatize the Shipyard. Centrales de la Costa Atlántica S.A. Centrales de la Costa Atlántica S.A. (“Centrales de la Costa Atlántica”), is a corporation 99% owned by the Province and 1% owned by Banco Provincia, which produces and commercializes power generated through its four power plants located in the Atlantic coast of the Province. As a power generator agent, Centrales de la Costa Atlántica is part of the Mercado Eléctrico Mayorista (Wholesale Electrical Market or “MEM”), and its operations are integrated to the National Interconnected System. Centrales de la Costa Atlántica has an installed capacity of 510 MW. In the last years, power consumption has grown dramatically across the country and between 2002 and 2006, Centrales de la Costa Atlántica’s generation has increased by more than 400%. Centrales de la Costa Atlántica has provided satisfactory responses in the context of increased energy demand by improving the availability and operation of its power plants through adequate preventive maintenance, remodeling and other works. In addition, with the purpose of meeting the growing demand for power supply, the Modernization Project of Centrales de la Costa Atlántica established the incorporation of a new generation unit (Central Eléctrica Villa Gesell), which is already providing 80 MW in simple cycle operation. Secretariat of Planning and Public Services Control In December 2013, pursuant to Decree No. 1081/13, the Province created the Secretaría de Planificación y Control de los Servicios Públicos (Secretariat of Planning and Public Services Control), which among other functions supervises and controls Aguas Bonaerenses, Buenos Aires Gas, Centrales de la Costa Atlántica, the Provincial Transportation Agency, the Provincial Rail Program and the Buenos Aires Highway Program. 45 PUBLIC SECTOR FINANCES Scope and Methodology The public sector of the Province consists of the central administration of the Province, decentralized provincial institutions, provincial enterprises, trust funds formed (in whole or in part) with provincial funds, and the social security system. The provincial budget and public accounts reflect the consolidated results of the institutions and agencies that comprise the central administration of the Province, decentralized institutions and social security system (which operates on a pay-as-you-go basis). The Province does not consolidate the results of its municipalities, provincial enterprises and other agencies. Under provincial law, however, the Province is required to transfer a portion of its tax revenues to its municipalities, and certain provincial enterprises and agencies are required to transfer their profits or surpluses to the Province. The Province records transfers to these unconsolidated entities (including contributions, loans and advances to provincial enterprises) as expenditures, and transfers from these entities as revenues. The Province maintains its books and records in pesos and prepares its budget and financial statements in accordance with accounting principles set forth in the Financial Administration Law. These principles differ materially from generally accepted accounting principles, or GAAP, in Argentina and in other jurisdictions, including the United States, but are generally in line with the accounting principles followed by other Argentine provinces. The principal features of the Province’s accounting principles are: • revenues are not accounted for on an accrual basis, but are recognized in the period in which they are received; • expenditures are accounted for when they are accrued, regardless of whether there has been a cash outflow from the provincial treasury, except for interest expense, which is accounted for when paid; • capital investments are carried at cost without reduction for depreciation or amortization and accordingly, the Province does not record any charges for depreciation or amortization in its financial statements; • capital expenditures and investments in tangible assets are not capitalized, but are expensed during the period in which they are incurred; • construction contracts are expensed using the percentage of completion method; and • revenues, expenditures and public debt are not adjusted for inflation in the Province’s accounts. The financial records and statements of the Province are prepared and examined by the Contaduría General de la Provincia (General Accounting Office of the Province) and approved by the provincial Tribunal de Cuentas (Audit Tribunal). Pursuant to the Financial Administration Law, the General Accounting Office has until April 15 of each year to publish the financial statements of the previous fiscal year. In August 2004, the federal Congress adopted Law No. 25,917, the Fiscal Responsibility Law, which became effective on January 1, 2005. This law establishes a fiscal regime for the federal government and the provinces relating to transparency in public administration, expenditures, fiscal balances and indebtedness and, in particular, requires balanced budgets. On January 13, 2005, the Province adopted into provincial law the operative provisions of the Fiscal Responsibility Law. Certain provisions of the Fiscal Responsibility Law have been frequently suspended (see “Risk Factors―If the Federal Council of Fiscal Responsibility were to determine that the Province’s budget did not comply with the Fiscal Responsibility Law, the Province could be subject to sanctions”). Main Sources of Revenues From 2011 through 2015, approximately 71.4% of the Province’s revenues were derived from taxes, either federal or provincial. On average, during this period, provincial taxes represented 42.6% of total revenues, while federal tax transfers represented 28.8% of such revenues. The following chart shows the sources of the Province’s revenues for the year ended December 31, 2015. 46 Total Revenues by Source for the Year Ended December 31, 2015 (Total = ARS 274.31 billion) Capital Revenues 2.0% Social Security System Contributions 17.6% Provincial Taxes 43.3% Federal Non Tax Transfers 4.1% Federal Tax Transfers 28.6% Source: Provincial Non Tax Revenues 4.5% Ministry of Economy of the Province. Federal Tax Co-Participation Regime Under the federal constitution, both the federal and provincial governments are authorized to levy taxes. In 1935, the federal and provincial governments entered into a coordinated tax arrangement (also called “tax co-participation”) pursuant to which the federal government agreed to collect certain taxes on an exclusive basis and to distribute a portion of those tax revenues among the provinces. In exchange, the provincial governments agreed to limit the types of taxes they collected. This coordinated taxation regime has been extended and modified several times since its inception. Currently, the “shared” or “co-participated” taxes are income taxes, value-added taxes, several excise taxes levied on consumption and taxes on financial transactions. The Ley de Coparticipación Federal de Recursos Fiscales (the “Federal Tax Co-Participation Law”) enacted in 1988 and two agreements entered into between the federal and provincial governments in 1992 and 1993, currently govern the tax co-participation system. This scheme was memorialized in the 1994 amendments to the federal constitution, which granted constitutional recognition to the tax co-participation scheme. The current allocation of taxing powers between the federal government and the provinces is as follows: • federal and provincial governments are both authorized to levy taxes on consumption and impose other indirect taxes; • the federal government may also levy direct taxes (such as income taxes) in exceptional cases; • taxes collected by the federal government (except those collected for specific purposes) are to be shared between the federal and provincial governments; • the federal government has the exclusive right to levy taxes on foreign trade, which are excluded from the tax co-participation regime; and 47 • the provinces retain all taxing and other powers that are not expressly delegated to the federal government in the federal constitution. Under the tax co-participation system, the federal government is currently required to transfer to a federal co-participation fund 64.0% of income tax revenues, 89.0% of value-added tax revenues, 100.0% of revenues from the presumptive minimum income tax, 30.0% of banking debits and credits tax revenues and the revenues from excise tax and other minor taxes. Of the total annual co-participable revenues, ARS 549.6 million are transferred to the Fondo de Desequilibrios Fiscales Provinciales (Provincial Tax Imbalance Fund). Of the remaining revenues, 15.0% is transferred to the federal pension system, and 85.0% is distributed as follows: 42.3% of these funds is transferred to the federal government for its own needs and for transfers to the City of Buenos Aires (which until 1996 was under the administration of the federal government) and the Province of Tierra del Fuego,1.0% is retained in a special reserve for emergency situations and financial difficulties of the provinces and the remaining 56.7% of these funds is allocated to the provinces to be shared according to percentages set forth in the Federal Tax Co-Participation Law, which was established following negotiations among the federal government and the provinces. Under this law, the Province is entitled to 21.7% of the funds allocated to the provinces, subject to certain deductions or special allocations. The Province is required to transfer a proportion of that amount to the municipalities. After transfers to the municipalities, the Province’s use of the remaining federal tax co-participation payments is discretionary. In addition, the federal government is required to transfer an annual fixed sum to the provinces, including the Province, as partial compensation for provincial expenditures incurred in the administration of the public schools and hospitals within the provincial territory following the delegation of these administrative responsibilities to the provinces in 1994. This amount is deducted from the co-participable revenues to be distributed to all provinces. The Province’s share of this fixed sum is ARS 412 million. In 2006, the Ley de Financiamiento Educativo (Education Financing Law) was enacted by the federal Congress, with the goal of increasing financing to education, science and technology to 6.0% of the federal GDP, taking into account the consolidated 2010 budget of the federal government, the provinces and the City of Buenos Aires. Funds received by the Province under the Education Financing Law are deductible from the aggregate amount of co-participable tax transfers that the Province is entitled to under the tax co-participation system. In 2009 and 2010, the Province received ARS 2.11 billion and ARS 3.36 billion, respectively, in financing under the Education Financing Law. The Education Financing Law expired in 2010 and was not renewed for 2011. However, since 2012, the National budget laws reestablished this special allocation of funds. In 2013, the Province received ARS 6.99 billion, in 2014, it received ARS 8.96 billion and in 2015, the Province received ARS 21.6 billion in financing under the Education Financing Law. The Province has budgeted to receive ARS 28.36 billion in 2016 to go to the financing of education. In the three month period ended March 31, 2016, the Province received ARS 6.86 billion in financing under the Education Financing Law. In 2009, the federal government created the Fondo Federal Solidario (Federal Solidarity Fund) using 30.0% of the amount collected by the federal government from soybean export duties. The amounts from this fund are distributed to the provinces under the percentages established in the tax co-participation system for use on infrastructure projects. In turn, the provinces are required to transfer 30.0% of their share of these revenues to their respective municipal governments. Certain taxes not governed by the main tax co-participation system, such as the personal property tax, the Monotributo (Simplified Regime for Small Taxpayers), fuel tax and energy tax, are regulated by special regimes of co-participation. On several occasions, the Province has requested that the percentage of revenues allocated to the provinces under the federal tax co-participation regime be increased to ensure that the Province is able to continue providing basic public services. In addition, the Province has requested that, as required by the 1994 amendments to the federal constitution, the distribution of revenues among provinces be carried out following objective criteria, such as the number of inhabitants in, and the amount of federal taxes collected by, each province. According to data extracted from the 2010 Permanent Household Survey and published by the INDEC, 38.9% of the total Argentine population resides in the Province, and according to information published by the Ministry of Economy of the Province, approximately 48 37.0% of the federal taxes are collected within the Province. Notwithstanding the foregoing, under the federal tax co-participation system, only 21.7% of the total revenues from the tax co-participation system, after allocating all specially allocated tax co-participation revenues, is distributed to the Province. However, when taking into consideration the total annual co-participable revenues and all other federal transfers made pursuant to special regimes of co-participation (including, for example, the Conurbano Fund, as described below), the Province has received a lower effective co-participation coefficient amounting to 19.5% in 2011, 19.3% in 2012, 19.1% in 2013, 18.9% in 2014 and 18.7% in 2015. Moreover, although the Province is entitled to receive specified amounts of federal transfers pursuant to special laws intended to address its greater needs, these transfers are funded with designated sources of revenues and are capped or subject to limits. These caps or limits have been reached over time and the remainder of these designated revenues is distributed among all the provinces in accordance with the Federal Tax Co-Participation Law. These and other situations have led to a further dilution in the Province’s share of total federal tax transfers (including tax co-participation transfers). For example, the federal government is required to transfer up to 10.0% of the revenues from the federal income tax to the Fondo Para Obras de Carácter Social (Fund for Socially-Oriented Public Works), commonly known as the Fondo del Conurbano (Conurbano Fund), subject to an annual cap of ARS 650 million as provided by Law No. 24,621. The Province uses these funds to finance hospitals, schools, roads and other infrastructure projects and various social welfare programs in the Conurbano Bonaerense. However, the amount that is equal to 10.0% of federal income taxes has consistently exceeded the established cap and, as a result, the Province has received only ARS 650 million annually, while the remaining revenues have been transferred to the other provinces. In 2014 and 2015, the amount transferred to the Fondo del Conurbano was ARS 650 million and represented approximately 0.24% and 0.17%, respectively, of the federal income tax collection for each of those years. The amounts transferred were thus significantly lower than the 10.0% originally established. This cap, as well as other caps and limits have decreased the Province’s share of total federal tax transfers. In November 2015, the Supreme Court of Argentina ruled against the federal government, in connection with cases brought by two Argentine provinces (Santa Fe and San Luis), whereby the 15.0% deduction from co-participation payments assessed on the provinces to fund the ANSeS was declared unconstitutional. The Court concluded that between 1992 and 2005 such deduction took place with the agreement of said provinces. However, since 2006 such deduction was made by the federal government without the consent of the provinces. The rulings include an order to return to those provinces the co-participation payments deducted since then. The Court’s decision also urges the enactment of a new revenue sharing regime. An additional ruling issued by the Supreme Court of Argentina in November 2015, granted to the province of Córdoba an injunction suspending the 15.0% deduction of the shared taxes carried to fund the ANSeS from that province. On May 18, 2016, the federal government, the governors of most provinces, including the Province of Buenos Aires, and the Vice-Mayor of the City of Buenos Aires signed an agreement to gradually reduce the 15% deduction of the co-participable revenues at an annual rate of 3% from 2016 to 2020. In addition, according to the agreement, the federal government may apply up to 50% of the additional amounts corresponding to the provinces and the City of Buenos Aires to offset credits in its favor. The agreement also sets forth loans to be granted to the provinces in 2016 for an amount equivalent to 6% out of 15% of the co-participable revenues to which the provinces and the City of Buenos Aires had been entitled, if the deduction was not applicable. For 2017, 2018 and 2019, the loanable amount will be 3% annually. The disbursed amount will be repaid in four years and will bear semi-annual interest at the BADLAR rate, minus the necessary subsidy from the federal Treasury, so that the net rate is 15% for 2016 and 2017, and 12% for 2018 and 2019. The loan will be guaranteed by co-participable revenues. According to estimates of the Ministerio Del Interior, Obras Públicas Y Vivienda Del Gobierno Nacional (Federal Ministry of Internal Affairs, Public Works and Housing), the Province of Buenos Aires would receive approximately ARS 3.1 billion in 2016, ARS 7.1 billion in 2017, ARS 11.7 billion in 2018 and ARS 16.4 billion in 2019, and it will be granted loans for ARS 6.2 billion in 2016, ARS 3.6 billion in 2017, ARS 3.9 billion in 2018 and ARS 4.1 billion in 2019. On May 31, the federal government submitted to the federal Congress a draft bill ratifying the agreement. The agreement is subject to approval by the federal Congress and the respective provincial legislatures. In addition, pursuant to Decree No. 194/16, the federal government increased the co-participation coefficient of the City of Buenos Aires, from 1.4% to 3.75%, thereby reducing federal government’s revenues. 49 The Province has pledged a part of its revenues from federal tax transfers, including a part of the federal tax co-participation, to secure certain outstanding obligations, most of which are owed to the federal government. Under these security arrangements, the federal government is entitled to withhold a portion of the Province’s federal tax transfers to cover principal and interest payments on the secured obligations. As of December 31, 2015, the federal government retained approximately 3.5% of the federal tax transfers to the Province pursuant to these arrangements. See “Public Sector Debt—Pledge of Tax Co-Participation Revenues.” The following table sets forth the Province’s share of total federal automatic transfers to the Argentine provinces (other than pursuant to the Federal Solidarity Fund) compared to that of other provinces with a similar level of per capita GDP from 2011 through 2015. Provincial Share of Total Federal Automatic Tax Transfers (in percentages) 2011 19.5% 8.9% 8.8% 4.1% Province of Buenos Aires ........ Province of Santa Fe ................ Province of Córdoba ................ Province of Mendoza ............... Source: 2012 19.3% 8.9% 8.8% 4.1% 2013 19.1% 8.9% 8.8% 4.2% 2014 18.9% 8.9% 8.8% 4.2% 2015 18.7% 9.0% 8.9% 4.2% Ministry of Economy of the Province. The following table sets forth the Province’s federal tax co-participation revenues per capita (based on the 2001 and 2010 Permanent Household Survey) compared to that of other provinces with a similar level of relative development from 2011-2015. Provincial Per Capita Tax Co-Participation Revenues (in ARS) Province of Buenos Aires ....... Province of Santa Fe ............... Province of Córdoba ............... Province of Mendoza .............. Average of all Provinces ......... Source: ARS 2011 1,634.1 3,619.4 3,432.3 3,079.2 3,238.9 ARS 2012 2,033.0 4,552.9 4,313.9 3,866.4 4,065.9 ARS 2013 2,598.7 5,895.1 5,569.3 4,986.5 5,239.9 ARS 2014 3,480.7 8,037.9 7,578.3 6,789.4 7,111.2 ARS 2015 4,655.2 11,021.2 10,341.4 9,157.5 9,620.3 Ministry of Economy of the Province. Other Federal Tax Transfers The federal government also distributes to the Province other tax revenues that are not included in the tax co-participation regime described above. The principal tax transfers include the following: • Housing Fund. The federal government is required to transfer 33.2% of revenues from the federal tax on fuels to the Fondo Nacional de la Vivienda (National Housing Fund, or “FONAVI”), for purposes of funding the construction of low-income housing around the country. Under current federal law, the Province is entitled to 14.5% of the funds transferred to FONAVI. The Province received from the National Housing Fund ARS 0.38 billion in 2011, ARS 0.53 billion in 2012 and ARS 0.73 billion in 2013. In 2014, the Province received ARS 0.99 billion and ARS 1.22 billion in 2015. According to the 2016 Budget, the Province expects to receive ARS 1.71 billion in 2016. During the three-month period ended March 31, 2016, the Province received ARS 0.15 billion from this fund; • Highway Fund. The federal government is required to transfer 13.7% of revenues from the federal tax on fuels to the Fondo de Vialidad (the “Highway Fund”). The Highway Fund distributes these funds to the provinces on the basis of road construction and maintenance expenditures of each province, as well as other factors that include population size and fuel consumption. The Province received from the Highway Fund ARS 0.22 billion in 2011, ARS 0.26 billion in 2012 and ARS 0.44 billion in 2013. In 2014, the Province received 50 ARS 0.59 billion. During 2015, the Province received ARS 0.78 billion from this fund. According to the 2016 Budget, the Province expects to receive ARS 1.07 billion in 2016. During the three-month period ended March 31, 2016, the Province received ARS 0.20 billion from this fund; and • Federal Teachers’ Incentive Fund. The Fondo Nacional de Incentivo Docente (Federal Teachers’ Incentive Fund), was created in 1999 and is intended to improve state and state-subsidized private school teacher’s wages in the provinces and the City of Buenos Aires. The annual federal budget allocates general federal revenues to this fund. The allocation of this fund to the provinces is based on criteria corresponding to the number of teachers and class hours in every province. The Province received from the Federal Teacher’s Incentive Fund ARS 1.13 billion in 2011, ARS 1.31 billion in 2012 and ARS 1.32 billion in 2013. In 2014, the Province received ARS 1.33 billion. During 2015, the Province received ARS 1.92 billion from this fund. According to the 2016 Budget, the Province expects to receive ARS 2.83 billion in 2016. During the three-month period ended March 31, 2016, the Province received ARS 1.07 billion from this fund Federal Contributions The Province records other non-refundable payments or transfers from the federal government as federal contributions. These contributions consist primarily of discretionary transfers to the provinces, known as Aportes del Tesoro Nacional (National Treasury Contribution Fund), to meet special or emergency needs or to finance certain expenditures of national interest. In addition, pursuant to a 1999 agreement among the federal government and the provinces, the federal government offered to assume responsibility for provincial pension obligations within the national pension system and agreed to fund deficits in any provincial pension systems that were not transferred to it. Because the Province elected not to transfer its pension system to the federal government, it is entitled to receive transfers from the federal government from time to time to finance projected deficits in the provincial pension system. In exchange, the Province committed to harmonize its social security system with the federal social security system. The federal government did not make any transfers from 2001 through 2003, but transferred ARS 0.30 billion in 2004 as compensation for deficits recorded by the provincial pension system during those years. The federal government transferred ARS 0.35 billion in 2006, ARS 0.36 billion in 2007, ARS 0.39 billion in 2008, ARS 0.86 billion in 2009 and ARS 0.73 billion in 2010 as compensation for the deficits recorded by the provincial pension system. Because the Province provisionally funded these deficits using general provincial revenues, there are no restrictions on the Province’s use of such transferred amounts. The Province has received no federal contributions since 2011. Further, under the Education Financing Law, the federal government created the Teacher’s Salary Compensation Federal Program to compensate for any inequities in teachers’ salaries among the provinces. In 2009, the federal government transferred ARS 0.22 billion to the Province pursuant to this program. Since 2010, the federal government has not made any transfers to the Province under this program. Provincial Tax Revenues Historically, the largest source of the Province’s revenues has been the collection of provincial taxes. In 2014, 60.7% of total tax revenues (total federal and provincial tax revenues, but excluding other federal and provincial sources of income) were provincial tax revenues. As of the date of this offering memorandum, the following are the main provincial taxes: • Gross revenue tax. The gross revenue tax is the single largest source of provincial tax revenue. Gross revenues of most industrial, commercial and business activities, carried out within the jurisdiction of the Province, are taxed at rates ranging from 1.0% to 12.0%. The applicable rate depends on a variety of factors, including the nature of the taxpayer, the type of activity and the size of its business or activity. Exempted activities include work in an employer-employee relationship, holding public office and export of goods and services. In addition, all of the activities performed by the federal, provincial and the City of Buenos Aires governments, stock exchanges and other capital markets, privately owned schools and religious institutions are also exempt. Gross revenue tax on alcoholic beverages, gambling and other activities which the Province considers detrimental to a person’s health are normally taxed at higher rates. At present, 43.3% of the gross 51 revenue tax is kept by the Province to fund social plans and expenses related to municipalities; 25.0% is transferred to the Fondo Provincial Compensador de Mantenimiento de Establecimientos Educativos (Provincial Compensation Fund for the Maintenance of Educational Institutions), a special purpose fund which compensates municipalities for the maintenance of schools; 4.25% is transferred to ARBA to fund its expenditures; and 5.0% is distributed among municipalities, based on population, to fund waste disposal. The remaining 22.5% is transferred to the municipalities as compensation for their tax collection and administration services. • Real Estate Tax. The real estate tax is determined by applying a tax assessment on the appraised fiscal value of urban and rural real estate located in the Province. Both the applicable tax rate and the applicable tax base depend on a variety of factors, including the location (urban or rural), the condition (vacant, built, improved) and on whether the title holder has other real estate property. Also, all real estate owned by federal, provincial and municipal governments, religious temples, non-profit organizations, universities, public libraries, health care organizations and free social assistance, and firefighting services, among others, or which are historical monuments, are exempt from the real estate tax. The Province also grants a 100% real estate tax discount for properties located in areas with unsatisfied basic needs, valued at less than ARS 25,000 and owned by retirees or pensioners, either individually or as undivided estate. The Province has decentralized to its municipalities the administration and collection of real estate taxes in rural areas to increase efficiency. Proceeds from such taxes are kept by the Province, except for: 12.0% of such proceeds, which are allocated to road construction and maintenance; 3.0% of such proceeds, which are allocated to a welfare fund; and 20.0% of such proceeds, which are distributed to the municipalities as compensation for their tax collection and administration services. • Automobile Tax. The Province charges a tax on automobiles registered in the Province. The tax rate, which ranges from 3.0% to 5.51% for most motor vehicles, is determined by taking into consideration the model, year, type, category and appraised value of the vehicle, and is fixed annually in a provincial tax law. The appraised value of each vehicle is calculated as a percentage of the valuation determined by the Federal Automobile Register and by recorded liens on the vehicle. Certain vehicles used for productive activities are classified as capital assets and are subject to a lower tax rate than vehicles deemed to be final consumer goods. At present, the collection of the automobile tax for vehicles manufactured between 1990 and 2004 has been decentralized to municipalities, and automobile taxes collected by each municipality are kept by such municipality. • Stamp Tax. The Province levies a stamp tax on all acts, agreements and transactions, for good and valuable consideration, entered into within the territory of, or that have effects in, the Province, and that are documented in private or public instruments. The tax rate ranges from 0.2% to 12.0% (or, in the case of lottery tickets, 24.0%) of the value of the underlying agreement or transaction depending on the subject of the transaction. All parties to the activity subject to this tax are jointly and severally liable for its payment. • Energy Tax. The Province levies a tax on companies that distribute electricity within its territory by means of a concession of either the federal or the provincial government. The tax rate is 0.6% on the gross revenues attributable to the sale of electricity to final consumers. Companies that are subject to the energy tax are exempt from the gross revenue tax, the stamp tax, the automobile tax and the real estate tax. In addition, the Province levies a tax on electricity consumption by all electricity users at a rate of 10.0% for households and 20.0% for businesses. This tax is levied on the total amount invoiced by the service provider, who acts as withholding agent. Revenues generated by this tax were historically allocated to a special fund for electrical works. However, pursuant to Law No. 13,863, since January 1, 2008, all revenues from the energy tax are allocated to fund current expenditures of the Province. • Tax on Gratuitous Transfers of Property. This tax was created pursuant to Law No. 14,044 (the “2010 Tax Law”) and has been in effect since January 1, 2011. The tax is levied on any increase in assets that results from a gratuitous title transfer, including inheritances, legacies and gifts. The amount to be taxed, which includes a fixed component and a variable component that is based on differential rates (which range from 4.0% to 21.9%), varies according to the property value being transferred and the degree of kinship of the parties involved. Any gratuitous transfer of property lower than or equal to ARS 78,000 is exempt. This amount is increased to ARS 325,000 in the case of transfers among parents, sons, daughters and spouses. In addition, donations to the government, religious and cultural institutions, and transfers of community property in case of 52 death, among others, are exempt from this tax. Under the tax on gratuitous transfers of property, 80.0% of revenues collected are allocated to the Fondo Provincial de Educación (Provincial Educational Fund), 10.0% are allocated to the Fondo para el Fortalecimiento de Recursos Municipales (Municipal Resources Strengthening Fund), and 10.0% to the Fondo Municipal de Inclusión Social (Municipal Fund for Social Inclusion). • Tax Amnesty and Incentive Plans. The Province has established several tax amnesty and incentive plans, including plans currently in force, for the collection of overdue taxes, which, along with other efforts of the Province to strengthen tax enforcement, have provided significant additional funds to the Province in recent periods. Among other benefits, incentive plans allow taxpayers, to pay overdue taxes in several installments. The Province charges interest on the overdue obligations. Implementation of these plans and other programs designed to increase the efficiency of tax collection has led to a decrease in unpaid taxes. The Province expects the decrease in unpaid taxes to result in diminishing tax collection under these plans. Creation of the Tax Collection Agency of the Province of Buenos Aires (ARBA) In December 2007, pursuant to Law No. 13,766, the Province created the Agencia de Recaudación de la Provincia de Buenos Aires (Tax Collection Agency of the Province of Buenos Aires, or “ARBA”). ARBA is an autonomous public institution that took over the tax collection and administration functions and duties from the Public Revenues Secretariat of the Ministry of Economy. ARBA implements the Province’s tax policies and carries out the determination, supervision and collection of taxes. ARBA has its own budget, funded in part by a percentage of provincial tax revenues, which is determined on an annual basis by the relevant budget law. This percentage was initially, in 2008, set at 3.5%, but was later reduced to 2.75%. In addition, ARBA has an incentive account to which up to 0.75% of the revenues generated by the Province’s tax collection efforts are credited. The funds in this incentive account are distributed among ARBA’s personnel depending on the performance and the efficiency at each level and of each agent, based on objective standards approved by the Ministry of Economy on an annual basis. For a discussion of the evolution of tax revenues since the creation of ARBA, see “—Fiscal Result of 2011 Compared to Fiscal Result of 2010”, “—Fiscal Result of 2012 Compared to Fiscal Result of 2011”, “—Fiscal Result of 2013 Compared to Fiscal Result of 2012”, “—Fiscal Result of 2014 Compared to Fiscal Result of 2013” and “—Fiscal Results for the NineMonth Period Ended September 30, 2015 Compared to Fiscal Results for the Nine-Month Period Ended September 30, 2014” in “Public Sector Finances—Evolution of Fiscal Results: 2010—the third quarter of 2015.” Tax Reform In July 2008, the provincial legislature enacted Law No. 13,850 (the “Tax Reform Law”), which implemented the first of a series of comprehensive changes in the provincial tax system with the main goal of increasing provincial tax revenues. The Tax Reform Law provided for the application of the gross revenue tax to primary sectors and industrial activities, which were previously exempt, and established a 1.0% tax rate on companies invoicing over ARS 60 million per year in these sectors. The Tax Reform Law also established a 4.5% gross revenue tax rate on companies invoicing over ARS 30 million per year in the retail and wholesale commerce sector. The Province estimates that this reform generated a revenue increase of approximately ARS 900 million in 2008. In addition, the Tax Reform Law created the Fondo para el Fortalecimiento de Recursos Municipales (Municipal Revenue Strengthening Fund) to which 2.0% of gross revenue tax collection is allocated. In addition, in September 2008, the Province created the Fondo Municipal de Inclusión Social (Municipal Fund for Social Inclusion) to which 1.5% of gross revenue tax collection is transferred. Both funds are distributed to municipalities that have abolished certain municipal taxes such as inspection, advertisement and abattoir taxes. 2010 Tax Changes On October 2009, the provincial legislature approved the 2010 Tax Law, which introduced the following main modifications with the goal of increasing provincial tax revenues: • Gross revenue tax. Increased the tax rate for service businesses that invoiced more than ARS 30 million on an annual basis from 3.5% to 4.5%, with retroactive effect in respect of the 2009 fiscal year. 53 • Real Estate Tax. Increased the urban real estate tax for properties valued at more than ARS 100,000. • Stamp Tax. Increased the tax rate for purchases of automobiles through individuals and other entities that are not agencies or dealerships that pay gross revenue taxes, with retroactive effect in respect of the 2009 fiscal year. • Gratuitous Transfer of Property Tax. Although this tax was created by the 2010 Tax Law, it began to be collected in 2011. 2011 Tax Changes In December 2010, the provincial legislature approved Law No. 14,200 (the “2011 Tax Law”). Among other modifications, the 2011 Tax Law raised the urban real estate tax base from 80% to 90% of the fiscal value of the property. In addition, the 2011 Tax Law eliminated tax increase caps to make this tax more progressive, thus applying higher taxes to higher-valued properties. Finally, the 2011 Tax Law increased rural real estate taxes to an average rate of 15%. 2012 Tax Changes Law No. 14,333 (the “2012 Tax Law”), which was approved by the legislature in November 2011 and amended on May 31, 2012, introduced the following main modifications, which were also principally directed at increasing provincial tax revenues: • Real Estate Tax. Updated the urban real estate tax valuation in order to account for the increases in market prices in the last few years. However, the tax base for improved properties was only increased by 65% of the increase in valuation to ease the impact of this increase on the taxpayers. For vacant lots, the tax base was increased by the same amount as the increase in valuation to combat speculation. Also, the 2012 Tax Law established a new tax base for the rural real estate tax equal to 50% of the fiscal valuation of real estate not subject to improvements and equal to 65% of the fiscal valuation of the developed and/or improved real estate. The tax rate for the rural real estate tax was also increased. • Automobile Tax. Tax brackets and rates were restructured to be more progressive by adding two levels, thereby capturing more value in the automobile fleet. The rate for automobiles valued over ARS 150,000 was increased from 3.0% to 5.51% and an additional annual fixed installment of ARS 6,308 was established. • Gross revenue tax. Increased the tax rate for commercial businesses that invoiced between ARS 1 million and ARS 40 million on an annual basis from 3.0% to 3.5%. In addition, the rates applied to alcoholic drinks, gambling and other activities determined by the Province to be detrimental to a person’s health were raised from 4.5% to 5% in the case of alcoholic beverages, and from 6% to 8% in the cases of gambling and other activities detrimental to a person’s health. The rate applicable to the sale of fertilizers and chemicals was raised from 1% to 2% to make it similar to the treatment provided by neighboring provinces and the City of Buenos Aires. • Stamp tax. The stamp tax exception for the purchase of new cars was eliminated and replaced with a 1% rate. The 2012 Tax Law also strengthened municipal revenues through a series of measures, including gross revenue tax and automobile tax decentralization, and by transferring to the municipalities the responsibility of administering and collecting gross revenue taxes from taxpayers whose annual revenues are ARS 450,000 or less. 2013 Tax Changes In November 2012, the provincial legislature approved Law No. 14,394 (the 2013 Tax Law), which introduced the following main modifications; also with the goal of increasing provincial tax revenues: • Real Estate Tax: A marginal rate system with a fixed rate and a variable rate, similar to the rate system applicable to rural and vacant lots, was established for urban real estate taxes. This structure replaced the previous fixed rate system, increasing the effective burden applicable to the highest items on the scale. In 54 addition, the tax base for built real estate increased from 65% to 85% of the updated fiscal value. Moreover, as set forth in the 2012 Tax Law, on January 1, 2013, tax reassessments on country clubs, gated communities, stud farms or similar projects became effective. Also, a complementary real estate tax was created levying each set of properties with a same use (built, urban, vacant or rural) and owned by a same person. The complementary real estate tax is equal to (i) the amount that would result from applying the corresponding real estate tax rate to the aggregate value of the set of properties owned by a same person and which have the same use, minus (ii) the sum of the basic real estate tax that effectively applies to each property of that set. In addition, holders of real estate exceeding ARS 350,000 in fiscal value were required to pay, for the fiscal year 2012, a one-time only extraordinary additional installment of the developed urban real estate tax. • Automobile Tax: A special 10% contribution calculated on the fiscal value of automobiles was created to fund road expansions and general road infrastructure maintenance. In addition, owners of automobiles and sporting vessels exceeding ARS 110,000 in fiscal value were required to pay, for the fiscal year 2012, a one-time only extraordinary additional installment of the automobile tax. • Gross revenue tax: Tax rates applicable to certain productive sectors of the provincial economy were increased. The tax rate for large agricultural and industrial companies invoicing more than ARS 60 million on an annual basis was increased from 1.0% to 1.75%. In turn, the tax rate applicable to the construction and financial services sectors was increased from 3.5% to 4.0% and from 7% to 8.0%, respectively. In addition, a 2% additional extraordinary installment was created for large farmers that work leased lands. Moreover, the tax rate for gaming activities was increased from 8.0% to 12.0%. 2014 Tax Law In November 2013, the provincial legislature approved Law No. 14,553 (the “2014 Tax Law”), which did not include any material modifications to the provincial tax framework. 2015 Tax Law In November 2014, the provincial legislature approved Law No. 14,653 (the “2015 Tax Law”), which included the following changes: • Real Estate Tax: rates on urban constructions real estate tax were increased, from a range of 0.4% - 2.453% to a range of 0.52% - 3.189%. The rates on rural land real estate tax were also increased from 2.21% to 2.87%. In addition, the fixed installments of both taxes were increased. • Gross Revenues: the rate on aircraft service and aircraft rentals with pilots was raised, from 1.5% to 3.5%, as the users of these services show high payment capacity. The exemption on revenues from the sale of fuel for ships and aircrafts engaged in international cargo or passenger transport was eliminated so that international cargo and transport will be treated the same as domestic cargo and transport. • Stamp Tax: a 1.8% rate was levied on agreements transferring professional sportsmen’s rights. 2016 Tax Law In January 2016, the provincial legislature approved Law No. 14,808 (the “2016 Tax Law”), which included the following changes: • Real Estate Tax: rates on urban constructions real estate tax were increased, from a range of 0.52% - 3.189% to a range of 0.633% - 4.156%. The ranges on rural land real estate tax were also increased from 0.46% - 2.87% to a range of 0.556% - 3.706%. In addition, the fixed installments of both taxes were increased. • Gross Revenues: the invoiced amount allowable to access to reduced rates was increased to benefit certain economic sectors that generate employment. • Gratuitous Transfer of Property Tax: the provincial legislature increased the property value exempt from this tax to ARS 78.000 or ARS 325.000 in the case of transfers among parents, sons, daughters and spouses. 55 Provincial Non-Tax Revenues The Province derives non-tax revenues from various sources, including: o transfers of net profits or surpluses from unconsolidated provincial agencies and enterprises, including the Provincial Institute of Lotteries and Casinos (see “The Provincial Economy—Provincial Enterprises”); o proceeds from the sale of assets and loan recovery; o revenues from collecting fees (for services provided to third parties) and fines; o interest accrued on the Province’s loans to municipalities or other unconsolidated provincial agencies and enterprises; and o proceeds from the lease of provincial land. The Province also records revenues from recoveries on loans transferred as a result of the efforts of the Loan Recovery Committee. See “The Provincial Economy—Provincial Enterprises—Loan Recovery Committee.” Composition of Expenditures The Province provides a number of public services, primarily related to healthcare, education, security (including police and prisons), social programs, investments in public infrastructure and general provincial administration. Such services account for more than 70.0% of provincial expenditures (excluding debt service payments). The Province’s expenditures are classified as current and capital expenditures. Current expenditures consist of costs of personnel, goods and services and current transfers, which include net transfers to municipalities in accordance with the provincial tax co-participation regime and to unconsolidated provincial agencies and enterprises. Capital expenditures include real direct investment, loans and capital contributions to provincial enterprises and loans and transfers to municipalities for public works. The following chart shows the Province’s expenditures for the year ended December 31, 2015. Total Expenditures for the Year Ended December 31, 2015 (Total = ARS 295.77 billion) Others 0.0% Capital Expenditures 3.7% Property Rent 3.3% Social Security System Benefits 16.9% Personnel 50.0% Current T ransfers 20.1% Goods and Services 5.9% 56 Source: Ministry of Economy of the Province. Current Expenditures Personnel. Personnel expenditures, which consist mainly of wages and other benefits paid to employees of the public provincial administration, are the largest component of the Province’s total expenditures, representing approximately 48.6% of total expenditures. The following table shows the number of public employees authorized to be hired by the Province by sector in accordance with the respective budget law from 2011 through 2016. Provincial Employees 2011-2016(1) (number of employees) 2011 Education.... 296,629 59.4% Health and Social Aid ... 48,785 9.8% Security Services ...... 86,225 17.3% Judicial System ........ 27,753 5.6% Others ......... 39,635 7.9% 499,026 100.0% Total........... (1) Source: 2012 301,443 59.2% As of December 31, 2013 2014 311,795 59.5% 311,803 59.5% 2015 314,163 58.4% 2016 325,908 55.6% 51,984 10.2% 50,133 9.6% 50,472 9.6% 53,845 10.0% 64,792 11.0% 86,213 16.9% 84,614 16.1% 85,624 16.3% 92,849 17.3% 120,745 20.6% 28,403 40,824 508,866 5.6% 8.0% 100.0% 29,198 48,643 524,382 5.6% 9.3% 100.0% 29,198 47,274 524,370 5.6% 9.0% 100.0% 29,643 47,393 537,893 5.5% 8.8% 100.0% 31,863 43,161 586,468 5.4% 7.4% 100.0% Figures reflect employees authorized to be hired for each fiscal year by the respective budget law (items “Resumen del Número de Cargos” and “Resumen Horas Cátedra”), regardless of effectiveness of personnel hiring. Ministry of Economy of the Province. In 2012, provincial employment increased by 2.0% as compared to 2011, due to an increase in personnel in the health and social assistance sector. Law No. 14,393 (the “2013 Budget Law”) contemplated an increase of 3.1% in personnel due to an increase in personnel in the education and judicial sectors, among others. There were no significant changes in the Province´s number of employees for 2014. The 2015 Budget Law registered a 2.6% increase in personnel, mainly due to an increase in personnel in the security sector. In 2016, the Budget law authorized an increase in personnel of 9.0% to strengthen the security and health sectors. The public sector employees of the Province are represented by 35 separate unions, including five teachers unions and one union for judicial employees. During 2013, the provincial government reached certain wage agreements with different unions. These agreements provided wage increases to be granted in three stages. The first stage involved an approximate 12.5% increase, effective as of April 2013. The second stage involved an additional increase of approximately 8.2% (21.8% in the aggregate), effective as of October 2013. Finally, the last stage involved a further increase of 1.07% (23.1% in the aggregate), payable as of January 2014. In 2013, the estimated impact of the wage agreements described above was of ARS 8.890 million, which represented a 14.4% increase in personnel expenditures compared to 2012. Additionally, in December 2013 the Province granted a new wage increase to the public security forces (police and prison services), which became effective as of January 1, 2014, representing a 2% increase in aggregate personnel expenditures for 2014. In May 2014, all public employees of the Province’s workforce completed negotiations and reached wage agreements. These agreements provided wage increases to be granted in two stages. The first stage involved an 18.4% increase, payable as of March 2014; while the second stage involved an additional increase of 8.9% (28.8% in the aggregate), payable as of August 2014. Wage negotiations for 2015 began in December 2014. The first stage of the negotiations was agreed upon in January 2015. This first stage included an average 7.0% wage increase for January and February 2015, and an additional 2.98% wage increase to resolve wage quality issues such as transfer of sums into the basic salary, pension, welfare contributions or the administrative career and hierarchical scale staff recategorization. The second stage involved an 57 additional wage increase of 12% (23.2% in the aggregate), effective as of March 1, 2015. The third stage, effective as of August 1, 2015, involves a further increase of approximately 9.8% (35.3% in the aggregate). The wage agreements described above are estimated to represent a 26% increase in personnel expenditures for 2015, as compared to 2014. Wage negotiations for 2016 began in February 2016. Later that same month, an agreement was reached with the teachers’ union, which includes a 3% wage increase effective as of February 1, 2016, an aggregate 16% increase effective as of March 1, 2016 and an aggregate 25% increase effective as of July 1, 2016. Furthermore, the federal government agreed to increase its contributions to the Federal Teacher’s Incentive Fund by ARS 400 per teacher position effective as of February 1, 2016 and to an aggregate contribution of ARS 700 per teacher position by July 1, 2016. In addition, the Province has reached agreements with approximately 99% of the provincial public sector employees. These agreements include different types of increases. With respect to semi-annual increases, the wage agreements include a cumulative wage increase of 15% to be granted in two stages. With respect to annual increases, the wage agreements include a cumulative increase of up to 28% to be granted in three to four stages. The Province expects to restart negotiations with those unions that agreed to semi-annual wage increases, which account for approximately 23% of the total employees. Goods and Services. The Province purchases a wide variety of goods and services from the private sector in connection with the provision of education, health, security and other public services, and the administration and general maintenance of the provincial government. Current Transfers. Pursuant to provincial law, the Province is required to transfer to its municipalities 16.1% of the funds received by the Province under the federal tax co-participation regime and of provincial tax revenues collected by the Province (excluding certain taxes such as the energy tax). In addition, the Province has delegated to some municipalities the collection of certain tranches of the gross revenue tax, rural real estate tax and automobile tax on older vehicles, in exchange for which the municipality retains a portion of the tax collected. Furthermore, pursuant to provincial law, the Province is entitled to allocate a portion of amounts to be transferred to the municipalities to capitalize a special fund for social programs and for provincial public works. Transfers to municipalities account, on average, for slightly more than 55.0% of the total current transfers during the period 2011-2015. The balance of current transfers include those allocated to finance several social programs, grant subsidies to private schools and pay medical residents’ salaries, among others. Capital Expenditures Capital Investment. Capital investments have historically constituted an important component of total capital expenditures. Most capital investments reflect the funding of public works, such as hydraulic and waterworks, housing, roads and construction of public buildings, among other investments. Other capital investments include the purchase of new capital goods such as hospital equipment, automobiles and computers. Loans and Capital Contributions. This category comprises loans to municipalities, principally for municipal public works and low-cost housing, as well as capital contributions to provincial enterprises. Transfers for Public Works. Under the Programa para el Fortalecimiento de los Municipios (Program for the Strengthening of Municipalities, or “PFM”), the Province allocates loan proceeds received through the federal government from multilateral organizations, such as the World Bank, to municipalities for purposes of public works. Recipient municipalities must reimburse the PFM for the amount of such transfers and the PFM, in turn, repays borrowed amounts to the multilateral lenders through the federal government. 58 Evolution of Fiscal Results: 2011 –March 31, 2016 The following table shows the Province’s fiscal results in nominal pesos from 2011 through March 31, 2016. Fiscal Results (in millions of nominal pesos, except as otherwise indicated) For the three-month period ended March 31, As of December 31, 2011 2012 2013 2014 2015 2015 (USD)(1) 2015 2016 (USD)(1) 2016 Current Revenues ............................... 86,932 108,261 146,619 198,002 268,936 29,017 57,477 75,349 5,201 Total Tax Revenues ............................ 61,277 78,981 110,381 147,397 197,116 21,268 45,397 60,933 4,206 Provincial Taxes .............................. 35,193 46,128 67,632 89,532 118,778 12,816 28,331 37,992 2,622 Federal Tax Transfers ...................... 26,083 32,853 42,749 57,865 78,338 8,452 0 17,066 22,942 1,583 Social Security System Contributions .................................... 14,955 20,308 25,930 32,787 48,286 5,210 0 8,908 11,069 764 Non Tax revenues................................ 10,701 8,972 10,308 17,817 23,534 2,539 3,172 3,347 231 Other non-Tax Revenues ................. 2,085 2,961 4,042 5,425 6,636 716 780 1,161 80 Current Transfers ............................. 8,616 6,011 6,265 12,393 16,898 1,823 2,392 2,186 151 Provincial Transfers .................... 2,663 4,093 3,731 4,565 5,541 598 1,047 678 47 Federal Transfers ........................ 5,766 1,790 2,534 7,613 11,139 1,202 1,345 1,508 104 Other Transfers ........................... 187 127 0 215 219 24 0 0 0 Current Expenditures ......................... 92,732 116,165 146,387 194,649 284,756 30,724 56,797 73,947 5,104 Personnel ......................................... 46,727 59,030 72,908 98,236 147,830 15,950 29,411 39,639 2,736 Good and Services ........................... 6,224 6,821 7,031 10,372 17,472 1,885 2,757 2,418 167 Property Rent ................................... 2,544 3,545 4,347 6,721 9,874 1,065 1,897 1,620 112 Social Security System Benefits....... 15,437 22,089 28,776 35,171 50,006 5,395 9,991 13,768 950 Current Transfers ............................. 21,789 24,668 33,187 44,146 59,569 6,427 12,741 16,502 1,139 Miscellaneous .................................. 12 12 137 3 6 1 0 0 0 Current Account Balance ................... (5,800) (7,903) 232 3,353 (15,820) (1,707) 680 1,402 97 Capital Revenues ................................ 3,359 3,171 3,434 4,981 5,369 579 1,378 2,407 166 0 Capital Expenditures .......................... 5,703 4,125 4,694 7,534 11,019 1,189 1,835 1,876 129 Capital Investments.......................... 2,431 1,624 2,002 3,870 5,240 565 1,243 675 47 Transfers for Public Works .............. 2,248 1,572 1,729 2,587 3,028 327 373 575 40 Loans and Capital Contributions ...... 1,025 930 964 1,078 2,750 297 0 219 626 43 Total Revenues ..................................... 90,292 111,433 150,052 202,983 274,305 29,597 58,855 77,756 5,367 Total Expenditures ................................ 98,435 120,290 151,081 202,183 295,775 31,913 58,632 75,823 5,233 Primary Balance ................................. (5,600) (5,313) 3,319 7,521 (11,596) (1,251) 2,120 3,553 245 Financial Balance ................................ (8,144) (8,858) (1,029) 800 (21,470) (2,317) 224 1,933 133 (1) Source: Peso amounts as of December 31, 2015 have been converted into USD solely for the convenience of the reader at a rate of ARS 9.268 per USD 1.00, which was the average rate published by the Central Bank in 2015. Peso amounts for the three-month period ended March 31, 2016 have been converted into USD solely for the convenience of the reader at an exchange rate of ARS 14.488 per USD 1.00, which was the average rate published by the Central Bank for that period. The USD equivalent information should not be construed to imply that the peso amounts represent or could have been or could be converted into USD at such rates or any other rate. Ministry of Economy of the Province. The following tables set forth the composition of the Province’s tax revenues (including federal transfers) from 2011 through the three-month period ended March 31, 2016. Composition of Tax Revenues (in millions of nominal pesos) 59 For the three-month period ended March 31, As of December 31, 2011 2012 2013 2014 2015 2015 2016 Federal Tax Transfers Federal Tax Co-Participation ................. 22,554 22,941 30,292 42,009 48,476 9,525 13,243 Education Financing .............................. - 5,690 6,986 8,961 21,610 5,137 6,861 Conurbano Fund .................................... 650 650 650 650 650 650 650 FONAVI ................................................ 382 535 734 992 1,223 112 153 Highway Fund ....................................... Others .................................................... 221 2,276 262 2,775 440 3,647 588 4,665 777 5,602 169 1,473 197 1,839 Total Federal Transfers .................. 26,083 32,853 42,749 57,865 78,338 17,066 22,942 Gross Revenues Tax .............................. 26,172 33,357 49,525 67,023 87,372 19,171 25,739 Real State Tax ........................................ 2,241 3,774 5,447 5,612 6,972 2,448 3,417 Automobile Tax ..................................... 2,125 2,973 4,473 5,693 9,067 3,321 4,580 Stamp Tax .............................................. 2,955 3,987 5,323 6,397 9,330 1,893 2,565 Tax Amnesty Plans ................................ 1,102 1,267 1,784 3,470 4,146 1,080 1,093 Gratuitous Transfers of Property ............ Others .................................................... 26 573 71 699 134 947 181 1,157 427 1,465 43 375 78 519 Total Provincial Taxes..................... 35,193 46,128 67,632 89,532 118,778 28,331 37,992 Provincial Taxes Source: Ministry of Economy of the Province. Fiscal Result of 2012 Compared to Fiscal Result of 2011 Total Revenues. In 2012, total revenues increased by 23.4%, to ARS 111.43 billion from ARS 90.29 billion in 2011. This increase reflects the following: • 28.9% increase in total tax revenues, to ARS 78.98 billion in 2012 from ARS 61.28 billion in 2011, due to a 25.9% increase in federal tax transfer, to ARS 32.85 billion in 2012 from ARS 26.08 billion in 2011, and a 31.1% increase in provincial tax revenues, to ARS 46.13 billion in 2012 from ARS 35.19 billion in 2011, mainly due to: ○ 34.9% increase in stamp tax collections, to ARS 3.99 billion in 2012 from ARS 2.95 billion in 2011; ○ 27.5% increase in gross revenue tax collections, to ARS 33.36 billion in 2012 from ARS 26.17 billion in 2011; and ○ 68.4% increase in real estate tax collections, to ARS 3.77 billion in 2012 from ARS 2.24 billion in 2011. • 16.2% decrease in non-tax revenues, to ARS 8.97 billion in 2012 from ARS 10.70 billion in 2011, • 35.8% increase in Social Security, to ARS 20.31 billion in 2012 from ARS 14.96 billion in 2011. Total Expenditures. In 2012, the Province’s total expenditures increased by 22.2%, to ARS 120.29 billion from ARS 98.44 billion in 2011. This increase is due to: • 26.3% increase in personnel expenditures, to ARS 59.03 billion in 2012 from ARS 46.73 billion in 2011, reflecting the cumulative impact of salary increases granted in 2011. In 2012, the Province granted salary increases of approximately 21.0% (including an increase, as of March 1, 2012, to the primary school teacher monthly minimum wage from ARS 2,400 to ARS 2,900); 60 • 13.2% increase in current transfers, to ARS 24.67 in 2012 from ARS 21.79 billion in 2011, mainly due to an increase in transfers to municipalities resulting from an increase in federal tax transfers and provincial tax revenues; • 9.6% increase in goods and services expenditures, to ARS 6.82 in 2012 from ARS 6.22 billion in 2011, primarily due to an increase in the cost of goods; • 43.1% increase in social security benefits, to ARS 22.09 in 2012 from ARS 15.44 billion in 2011, attributable to the salary adjustment mechanism; and • 27.7% decrease in capital expenditures, to ARS 4.13 in 2012 from ARS 5.70 billion in 2011. Primary Balance. In 2012, the Province’s primary balance deficit declined by 5.1%, to a deficit of ARS 5.31 billion from a deficit of ARS 5.60 billion in 2011.This was mainly due to a reduction in the capital account deficit resulting from a reduction in capital expenditures. Financial Result. In 2012, the Province’s total deficit was ARS 8.86 billion, compared to a deficit of ARS 8.14 billion in 2011. This increase in the deficit was mainly due to a 39.3% increase in debt interest services, to ARS 3.55 billion in 2012 from ARS 2.54 billion in 2011. Fiscal Result of 2013 Compared to Fiscal Result of 2012 Total Revenues. In 2013, total revenues increased by 34.7%, to ARS 150.05 billion from ARS 111.43 billion in 2012. This increase reflects the following: • 39.8% increase in total tax revenues, to ARS 110.38 billion in 2013 from ARS 78.98 billion in 2012, due to a 30.1% increase in federal tax transfers, to ARS 42.75 billion in 2013 from ARS 32.85 billion in 2012, and a 46.6% increase in provincial tax revenues, to ARS 67.63 billion in 2013 from ARS 46.13 billion in 2012, mainly due to: ○ 48.5% increase in gross revenue tax collections, to ARS 49.53 billion in 2013 from ARS 33.36 billion in 2012; ○ 44.3% increase in real estate tax collections, to ARS 5.45 billion in 2013 from ARS 3.77 billion in 2012; and ○ 50.4% increase in automobile tax collections, to ARS 4.47 billion in 2013 from ARS 2.97 billion in 2012. Total Expenditures. In 2013, the Province’s total expenditures increased by 25.6%, to ARS 151.08 billion from ARS 120.29 billion in 2012. This increase reflects primarily the following: • 23.5% increase in personnel expenditures, to ARS 72.91 billion in 2013 from ARS 59.03 billion in 2012, principally reflecting the cumulative effect of salary increases granted in 2012 and 2013; • 34.5% increase in current transfers, to ARS 33.19 billion in 2013 from ARS 24.67 billion in 2012, mainly due to increased transfers to municipalities resulting from the increase in overall tax collections and co-participation transfers; • 30.3% increase in social security benefits, to ARS 28.78 billion from ARS 22.09 billion in 2012, attributable to the salary adjustment mechanism; and • 13.8% increase in capital expenditures, to ARS 4.69 billion from ARS 4.12 billion in 2012, due to increased spending on public works. 61 Primary Balance. In 2013, the Province’s primary balance increased from a deficit of ARS 5.31 billion in 2012 to a surplus of ARS 3.32 billion in 2013, due to a 34.7% increase in total revenues compared to a 25.6% increase in total expenditures. Financial Results. In 2013, the Province recorded a financial deficit of ARS 1.03 billion, compared to a total deficit of ARS 8.86 billion in 2012 (an 88.4% improvement), attributable to the increase in the primary balance. Fiscal Result of 2014 Compared to Fiscal Result of 2013 Total Revenues. In 2014, total revenues increased by 35.3%, to ARS 202.98 billion from ARS 150.05 billion in 2013. This increase reflects the following: • • 33.5% increase in total tax revenues, to ARS 147.40 billion in 2014 from ARS 110.38 billion in 2013, due to a 35.4% increase in federal tax transfers, to ARS 57.86 billion in 2014 from ARS 42.75 billion in 2013 and a 32.4% increase in provincial tax revenues, to ARS 89.53 billion in 2014 from ARS 67.63 billion in 2013, mainly due to: o 35.3% increase in gross revenue tax collections, to ARS 67.02 billion in 2014 from ARS 49.52 billion in 2013; o 27.3% increase in automobile tax collections, to ARS 5.69 billion in 2014 from ARS 4.47 billion in 2013; and o 20.2% increase in stamp tax revenues, to ARS 6.40 billion in 2014 from ARS 5.32 billion in 2013. 26.4% increase in social security benefits, to ARS 32.79 billion in 2014 from ARS 25.93 billion in 2013. Total Expenditures. In 2014, the Province’s total expenditures increased by 33.8%, to ARS 202.18 billion from ARS 151.08 billion in 2013. This increase reflects primarily the following: • 34.7% increase in personnel expenditures, to ARS 98.24 billion in 2014 from ARS 72.91 billion in 2013, principally reflecting the cumulative impact of the salary increases granted in mid-year 2013 and further increases granted in 2014; • 33.0% increase in current transfers, to ARS 44.15 billion in 2014 from ARS 33.19 billion in 2013, reflecting increased transfers to municipalities due to an increase in overall tax collections and co-participation transfers; • 22.2% increase in social security benefits, to ARS 35.17 billion in 2014 from ARS 28.78 billion in 2013, attributable to the salary increase adjustment mechanism; • 47.5% increase in goods and services expenditures, to ARS 10.37 billion in 2014 from ARS 7.03 billion in 2013, primarily due to an increase in the cost of goods; and • 60.5% increase in capital expenditures, to ARS 7.53 billion in 2014 from ARS 4.69 billion in 2013, due to increased spending on public works. Primary Balance. In 2014, the Province’s primary surplus increased by 126.6%, from a surplus of ARS 3.32 billion in 2013to a surplus of ARS 7.52 billion in 2014. This increase was primarily due to a 35.3% increase in total revenues, which was partially offset by a 33.8% increase in total expenditures. Financial Result. In 2014, the Province recorded a financial surplus of ARS 0.80 billion, compared to a financial deficit of ARS 1.03 billion in 2013, mainly due to the increase in the primary surplus. 62 Fiscal Result of 2015 Compared to Fiscal Result of 2014 Total Revenues. In 2015, total revenues increased by 35.1%, to ARS 274.3 billion from ARS 203.0 billion in 2014. This increase reflects the following: • 33.7% increase in total tax revenues, to ARS 197.7 billion in 2015 from ARS 147.4 billion in 2014, due to a 35.4% increase in federal tax transfers, to ARS 78.34 billion in 2015 from ARS 57.87 billion in 2014, and a 32.7% increase in provincial tax revenues, to ARS 118.78 billion in 2015 from ARS 89.53 billion in 2014, mainly due to: ○ 30.4% increase in gross revenue tax collections, to ARS 87.37 billion in 2015 from ARS 67.02 billion in 2014; ○ 24.2% increase in real estate tax collections, to ARS 6.97 billion in 2015 from ARS 5.61 billion in 2014; and ○ 59.2% increase in automobile tax collections, to ARS 9.07 billion in 2015 from ARS 5.70 billion in 2014. Total Expenditures. In 2015, the Province’s total expenditures increased by 46.3%, to ARS 295.77 billion from ARS 202.18 billion in 2014. This increase reflects primarily the following: • 50.5% increase in personnel expenditures, to ARS 147.83 billion in 2015 from ARS 98.24 billion in 2014, principally reflecting the cumulative effect of salary increases granted in 2014 and 2015; • 34.9% increase in current transfers, to ARS 59.57 billion in 2015 from ARS 44.15 billion in 2014, mainly due to increased transfers to municipalities resulting from the increase in overall tax collections and co-participation transfers; • 42.2% increase in social security benefits, to ARS 50.01 billion from ARS 35.17 billion in 2014, attributable to the salary adjustment mechanism; and • 46.2% increase in capital expenditures, to ARS 11.02 billion from ARS 7.53 billion in 2014, due to increased spending on public works. Primary Balance. In 2015, the Province’s primary balance decreased from a surplus of ARS 7.52 billion in 2014 to a deficit of ARS 11.60 billion in 2015, due to a 46.3% increase in total expenditures compared to a 35.1% increase in total revenues. Financial Results. In 2015, the Province recorded a financial deficit of ARS 21.47 billion, compared to a total surplus of ARS 0.8 billion in 2014, attributable to the increase in the primary balance. Fiscal Results for the Three-Month Period Ended March 31, 2016 Compared to Fiscal Results for the ThreeMonth Period Ended March 31, 2015 Total Revenues. Total revenues for the three-month period ended March 31, 2016 increased by 32.1%, to ARS 77.76 billion from ARS 58.85 billion in the same period in 2015. This increase reflects: • 34.2% increase in total tax revenues, to ARS 60.93 billion for the three-month period ended March 31, 2016 from ARS 45.40 billion during the same period in 2015, due to a 34.3% increase in federal tax transfers, to ARS 22.94 billion for the three-month period ended March 31, 2016 from ARS 17.07 billion during the same period in 2015 and a 34.1% increase in provincial tax revenues, to ARS 38.00 billion for the three-month period ended March 31, 2016 from ARS 28.33 billion during the same period in 2015, mainly due to: ○ 34.3% increase in gross revenue tax collections; ○ 37.9% increase in automobile tax collections; 63 • ○ 39.6% increase in real estate tax collections; and ○ 35.5% increase in stamp tax revenues. 24.3% increase in social security system contributions, to ARS 11.07 billion for the three-month period ended March 31, 2016 from ARS 8.91 billion during the same period in 2015. Total Expenditures. The Province’s total expenditures for the three-month period ended March 31, 2016 increased by 29.3%, to ARS 75.82 billion from ARS 58.63 billion during the same period in 2015. This increase in the total expenditures is principally due to: • 34.8% increase in personnel expenditures, to ARS 39.64 billion for the three-month period ended March 31, 2016 from ARS 29.41 billion during the same period in 2015, reflecting the cumulative impact of the salary increases granted in 2015; • 29.5% increase in current transfers, to ARS 16.50 billion for the three-month period ended March 31, 2016 from ARS 12.74 billion during the same period in 2015, mainly due to increased transfers to municipalities resulting from the increased federal co-participation and provincial tax revenues; and • 37.8% increase in social security benefits, to ARS 13.77 billion for the three-month period ended March 31, 2016 from ARS 9.99 billion during the same period in 2015, attributable to the salary adjustment mechanism. Primary Balance. The Province’s primary balance surplus for the three-month period ended March 31, 2016 amounted to ARS 3.55 billion compared to a surplus of ARS 2.12 billion in the same period in 2015. Such increase was due to the 32.1% increase in total revenues, which offset the 29.3% increase in total expenditures. Financial Results. In the three-month period ended March 31, 2016, the Province’s financial surplus was ARS 1.93 billion compared to a surplus of ARS 0.22 billion in the same period in 2015, mainly due to an increase in the primary surplus. 2016 Budget Overview of the Provincial Budget Process Under the provincial Constitution, the Governor is required to submit a budget bill to the legislature before August 31 for the following year. The annual budget represents an estimation of the Province’s revenues for the budgeted year on the basis of forecasts of the economic activity of Argentina and the Province, and of the necessary expenditures to render public services and to comply with the Province’s obligations. In addition, the budget, when approved, represents the amount that the Province is authorized to spend and the level up to which the Province may borrow. The provincial legislature has full power to amend or reject the budget bill submitted by the Governor. 2016 Budget Law As the prior administration did not submit a budget proposal in time, on December 16, 2015 the new administration’s executive branch submitted its proposed budget for 2016 to the provincial legislature. After several discussions, in particular related to the amount of indebtedness authorized for 2016, the legislature approved the 2016 Budget on January 14, 2016. 64 The following table shows the 2016 Budget, as compared to fiscal results for 2015: 2015 Fiscal Results vs. 2016 Budget (in millions of nominal Pesos) Current Revenues......................................................................................................................... Total Tax Revenues ...................................................................................................................... Provincial Taxes ....................................................................................................................... Federal Tax Transfers ............................................................................................................... 2015 268,936 197,116 118,778 78,338 2016 Budget 332,115 244,689 147,368 97,322 Variation 23.5% 24.1% 24.1% 24.2% Social Security System Contributions ......................................................................................... 48,286 55,693 15.3% Non Tax revenues ......................................................................................................................... Other non Tax Revenues ........................................................................................................... Current Transfers ...................................................................................................................... Provincial Transfers.............................................................................................................. Federal Transfers .................................................................................................................. Other Transfers ..................................................................................................................... 23,534 6,636 16,898 5,541 11,139 219 31,732 5,258 26,474 6,672 19,802 219 34.8% (20.8)% 56.7% 20.4% 77.8% Current Expenditures .................................................................................................................. Personnel .................................................................................................................................. Good and Services .................................................................................................................... Property Rent ............................................................................................................................ Social Security System Benefits................................................................................................ Current Transfers ...................................................................................................................... Miscellaneous ........................................................................................................................... 284,756 147,830 17,472 9,874 50,006 59,569 6 332,389 168,313 19,015 9,712 55,985 79,364 0 16.7% 13.9% 8.8% (1.6)% 12.0% 33.2% Current Account Balance ............................................................................................................ (15,820) Capital Revenues .......................................................................................................................... 5,369 6,314 17.6% Capital Expenditures ................................................................................................................... Capital Investments................................................................................................................... Transfers for Public Works ....................................................................................................... Loans and Capital Contributions ............................................................................................... 11,019 5,240 3,028 2,750 31,855 17,548 11,501 2,806 189.1% 234.9% 279.8% 2.0% Total Revenues ............................................................................................................................... Total Expenditures ......................................................................................................................... Primary Balance ........................................................................................................................... Financial Balance ......................................................................................................................... 274,305 295,775 (11,596) (21,470) 338,428 364,244 (16,104) (25,816) 23.4% 23.1% 38.9% 20.2% Source: (274) (98.3)% Ministry of Economy of the Province. Total Revenues. In 2016, the Province estimates an increase in total provincial revenues of 23.4% to ARS 338.43 billion, as compared with 2015 revenues. This increase is mainly due to a budgeted 24.1% increase in total tax revenues to ARS 244.69 billion in 2016, from ARS 197.12 billion in 2015. The increase in provincial tax revenues includes: • 25.4% increase in gross revenue tax collections due to the cumulative effect of the 2015 and 2016 modifications to the tax laws, which are expected to increase the efficiency and fairness of the tax system; • 20.0% increase in automobile tax collections; • 23.0% increase in real estate tax collections; and • 20.9% increase in stamp tax collections. In addition, capital revenues are budgeted to increase by 17.6%, to ARS 6.31 billion in 2016 from ARS 5.37 billion in 2015. 65 Total Expenditures. In 2016, total provincial expenditures are estimated to increase by 23.1%, to ARS 364.24 billion from ARS 295.77 billion in 2015, mainly due to: • 13.9% increase in personnel expenditures, to ARS 168.31 billion budgeted in 2016 from ARS 147.83 billion in 2015; • 8.8% increase in goods and services expenditures, to ARS 19.01 billion budgeted in 2016 from ARS 17.47 billion in 2015, mainly due to the strengthening of social, health and education programs; • 33.2% increase in current transfers and other expenditures, to ARS 79.36 billion budgeted in 2016 from ARS 59.57 billion in 2015, mainly due to increased federal co-participation tax revenues, which will result in an increase in transfers to municipalities; and • 189.1% increase in capital expenditures, to ARS 31.86 billion budgeted in 2016 from ARS 11.02 billion in 2015, mainly due to an increase in public works Primary Balance . In 2016, the Province expects the primary deficit to increase to ARS 16.10 billion from ARS 11.60 billion in 2015. Financial Result. In 2016, the Province expects to record a financial deficit of ARS 25.82 billion, compared to a financial deficit of ARS 21.47 billion in 2015. After the enactment of the 2016 Budget Law, the Province implemented certain measures to increase public expenditures, mainly to correct deficiencies in the public health, security and education sectors. Additionally, the Province estimates that its public finances will be affected by further wage agreements that the Province expects to reach with public employees in the third and fourth quarter of 2016 and expected increases in tax collections and current transfers. Therefore, the Province estimates that the financial deficit will be 11.6% higher than the financial deficit contemplated in the 2016 Budget, increasing from ARS 25.8 billion to ARS 28.8 billion. Public Works For 2016, the Province’s major budgeted public works projects include the following, among others: • • • The Roads Department has budgeted capital expenditures of ARS 5.36 billion for the construction, paving and improving of roads. The Roads Department’s principal projects include: ○ Paving of provincial route No. 6 and complementary works for an aggregate amount of ARS 0.37 billion; and ○ Paving of other provincial routes, including routes No. 30, No. 41, No. 51, No. 60, No. 65 and No. 67 for an aggregate amount of ARS 0.65 billion. The Ministry of Infrastructure has budgeted capital expenditures of ARS 9.76 billion, including: ○ Hydraulic emergency works, including the extension of potable water and sewage networks, for ARS 0.41 billion; ○ The cleaning of El Gato river in the city of La Plata, for ARS 0.32 billion; and ○ A project to control floods in the Del Rey river, for ARS 0.31 billion. The Instituto de la Vivienda (Housing Institute) has budgeted capital expenditures of ARS 2.58 billion, including ARS 0.63 billion for the Programa Techo Digno (Decent Housing Program), ARS 0.52 billion to the Programa de Solidaridad, Compartir y Mejoramiento de Vivienda y Hábitat (Solidarity, Sharing and Improvement of Housing and Habitat Program), ARS 0.10 billion for the Programa Mejoramiento de Barrios (Neighborhoods Improvement Program) and has allocated ARS 0.15 billion for the Programa Federal de Construcción y Mejoramiento de Viviendas (Federal Housing Improvement and Construction Program). 66 PUBLIC SECTOR DEBT General The Province satisfies its financing needs with a wide variety of sources depending on the provincial and federal economies and the domestic and international financing markets. The Province’s total indebtedness amounted to USD 14.14 billion, USD 14.74 billion, USD 12.56 billion, USD 10.56 billion, USD 9.36 billion, and USD 10.43 billion as of December 31, 2011, December 31, 2012, December 31, 2013, December 31, 2014, December 31, 2015 and March 31, 2016, respectively. As of March 31, 2016, the federal government held 27.7% of the Province’s total indebtedness, while 63.8% was held by local and international bondholders, 7.1% corresponded to multilateral credit organizations and the remaining 1.3% was held by bilateral credit agencies and other creditors. As of March 31, 2016, 35.3% of the Province’s total indebtedness was denominated in pesos, with the remaining 50.4%, 13.4%, 0.6% and 0.3% denominated in U.S. dollars, euros, other currencies and CER adjusted pesos, respectively. Also, as of March 31, 2016, 97.5% of the Province’s debt stock was medium-term and long-term and 63.3% was at fixed rate. Evolution of Debt: 2011 to March 31, 2016 The following tables describe the evolution of the Province’s total outstanding indebtedness from 2011 to March 31, 2016, by creditor, currency, interest rate and term: Total Gross Debt by Creditor (1) (in millions of U.S. dollars) As of December 31, CREDITOR 2011 2012 2013 As of March 31, 2014 2015 2015 2016 Federal Government ............... 7,321 51.8% 7,055 47.9% 5,460 43.5% 3,962 37.5% 3,234 34.5% 3,357 35.1% 2,894 Domestic Bondholders ............ 651 4.6% 1,472 10.0% 921 7.3% 728 6.9% 710 7.6% 526 5.5% 816 7.8% International Bondholders ....... 5,209 36.8% 5,264 35.7% 5,220 41.6% 4,916 46.5% 4,529 48.4% 4,738 49.6% 5,844 56.0% Multilateral Credit Agencies ... 874 6.2% 867 5.9% 861 6.9% 819 7.8% 753 8.0% 804 8.4% 740 7.1% Bilateral Credit Agencies ........ 157 1.1% 151 1.0% 141 1.1% 135 1.3% 133 1.4% 132 1.4% 136 1.3% Others ..................................... 3 14,135 0.0% 100.0% 3 14,744 0.0% 100.0% 2 12,556 0.0% 100.0% 3 10,561 0.0% 100.0% 3 9,362 0.0% 100.0% 3 9,560 0.0% 100.0% 2 10,432 0.0% 100.0% Total ....................................... Exchange Rates, ARS/USD (1) ........................... CER (2) .................................... (1) (2) (3) Source: 4.304 4.918 6.521 8.551 13.040 8.822 14.700 2.881 3.185 3.520 4.377 5.036 4.514 5.564 Excluding past and due interest. Last exchange rate recorded for each period. CER accumulated from February 4, 2002 until the end of each period. Ministry of Economy of the Province. 67 27.7% Total Gross Debt by Currency (1) (in millions of U.S. dollars) As of December 31, CURRENCY 2011 2012 As of March 31, 2013 2014 2015 2015 2016 Pesos ...................... 7,755 54.9% 8,130 55.1% 6,071 48.4% 4,442 42.1% 3,913 41.8% 3,835 40.1% 3,680 CER adjusted pesos 67 0.5% 60 0.4% 45 0.4% 41 0.4% 30 0.3% 41 0.4% 29 35.3% 0.3% USD ....................... 4,529 32.0% 4,747 32.2% 4,611 36.7% 4,500 42.6% 4,022 43.0% 4,285 44.8% 5,257 50.4% Euros(2)................... 1,700 12.0% 1,730 11.7% 1,760 14.0% 1,519 14.4% 1,338 14.3% 1,341 14.0% 1,402 13.4% others(3) .................. 84 0.6% 77 0.5% 68 0.5% 60 0.6% 59 0.6% 58 0.6% 63 0.6% Total ...................... 14,135 100.0% 14,744 100.0% 12,556 100.0% 10,561 100.0% 9,362 100.0% 9,560 100.0% 10,432 100.0% Exchange Rates,..... ARS/USD (4) .......... CER (5) ................... (1) (2) (3) (4) (5) Source: 4.304 4.918 6.521 8.551 13.040 8.822 14.700 2.881 3.185 3.520 4.377 5.036 4.514 5.564 Excluding past and due interest. Following the introduction of the euro in 1999, debts owed in a variety of European currencies were converted into euros. Figures include Swiss francs and Japanese yen. Last exchange rate recorded for each period. CER accumulated from February 4, 2002 until the end of each period. Ministry of Economy of the Province. Total Gross Debt by Type of Interest Rate (1) (in millions of U.S. dollars) As of December 31, By interest type Fixed rate (2) .............................. 2011 10,620 2012 75.1% 10,550 2013 71.6% 8,805 As of March 31, 2014 70.1% 7,187 2015 68.1% 5,637 2015 60.2% 6,355 2016 66.5% 6,605 63.3% Fixed rate + CER adjustment (3) 67 0.5% 60 0.4% 45 0.4% 41 0.4% 30 0.3% 41 0.4% 29 0.3% Fixed Step-up rate ..................... 1,953 13.8% 2,055 13.9% 2,107 16.8% 1,926 18.2% 1,801 19.2% 1,764 18.4% 1,861 17.8% Variable rate ............................. 1,495 10.6% 2,079 14.1% 1,599 12.7% 1,408 13.3% 1,895 20.2% 1,401 14.7% 1,936 18.6% 1.5% IDB -WB (4) ........................... 331 2.3% 275 1.9% 250 2.0% 163 1.5% 174 1.9% 140 2.0% 160 LIBOR .................................. 586 4.1% 592 4.0% 611 4.9% 656 6.2% 580 6.2% 664 6.4% 578 5.5% Tasa BADLAR(5) .................. 504 3.6% 1,137 7.7% 662 5.3% 519 4.9% 1,077 11.5% 532 5.6% 1,131 10.8% Others ................................... 73 14,135 0.5% 75 100.0% 14,744 0.5% 76 100.0% 12,556 0.6% 69 100.0% 10,561 0.7% 100.0% 64 9,362 0.7% 100.0% 4.304 4.918 6.521 8.551 13.040 8.822 14.700 2.881 3.185 3.520 4.377 5.036 4.514 5.564 Total ......................................... 64 0.7% 66 0.6% 9,560 100.0% 10,432 100.0% Exchange Rates,........................ ARS/USD (6) ............................. CER (7) ...................................... (1) (2) (3) (4) (5) (6) (7) Source: Excluding past and due interest. Consists primarily of Eurobonds and the Federal Debt Refinancing Program. Consists primarily of domestic notes. Includes multilateral debt. Rate determined by the Central Bank based on a survey of the rate paid on savings accounts and time deposits in pesos and in dollars by banks in the City of Buenos Aires and in Greater Buenos Aires. Last exchange rate recorded for each period. CER accumulated from February 4, 2002 until the end of each period. Ministry of Economy of the Province. 68 Total Gross Debt by Term (1) (in millions of U.S. dollars) As of December 31, TERM 2011 2012 Short-term (2) ............................. 386 Medium-term and long term (3) .. 13,749 Total ......................................... 14,135 100.0% 2.7% 888 97.3% 13,857 2013 6.0% 435 3.5% 94.0% 12,121 14,744 100.0% 12,556 As of March 31, 2014 2015 219 2.1% 327 96.5% 10,342 97.9% 9,036 100.0% 9,362 100.0% 10,561 2015 3.5% 114 96.5% 9,446 100.0% 9,560 2016 1.2% 256 2.5% 98.8% 10,176 97.5% 100.0% 10,432 100.0% Exchange Rates, ........................ ARS/USD (4) .............................. 4.304 4.918 6.521 8.551 13.040 8.822 14.700 CER (5) ....................................... 2.881 3.185 3.520 4.377 5.036 4.514 5.564 (1) (2) (3) (4) (5) Source: Excluding past and due interest. Debt with original maturity of one year or less. Debt with original maturity of more than one year. Last exchange rate recorded for each period. CER accumulated from February 4, 2002 until the end of each period. Ministry of Economy of the Province. Between 2011 and March 31, 2016, the federal government’s share of the Province’s public debt has fluctuated between 51.8% and 27.7%. The Province received significant financial assistance from the federal government in 2011, 2012, 2014 and 2015 through transfers of funds under a series of agreements known as Programas de Asistencia Financiera (Financial Assistance Programs, or “PAFs”). These agreements helped fund, among others, the Province’s debt service obligations. Moreover, the Province entered into additional agreements with the federal government to offset debt and to suspend and refinance the debt service owed by the Province to the federal government and other creditors. Additionally, the Province has entered into agreements with the Trust Fund for Provincial Development to invest in capital assets. On May 31, 2010, all outstanding indebtedness then owed to the federal government under the above-mentioned agreements was refinanced under the Federal Debt Refinancing Program and further debt refinancing agreements. See “—Debt Denominated in Pesos—Argentine Provincial Indebtedness Federal Refinancing Program” and “—Debt Denominated in Pesos—Debt Refinancing Agreements with the Federal Government.” Another important milestone in the history of provincial indebtedness was the 2006 provincial restructuring of Eurobonds, which have been in default since December 2001. See “—Debt Denominated in Foreign Currencies— Exchange Bonds” This debt restructuring helped the Province return to the international capital markets in October 2006. Since 2005, the favorable conditions of the financing agreements with the federal government as well as the provincial debt restructuring process have helped the Province improve its debt maturity profile and debt sustainability indicators. 69 The following charts show debt divided by total revenues and debt divided by provincial GDP from 2011 through 2015. Public Debt/GDP Public(1) 10% 9.2% Debt/Total Resources 9.1% 8.4% 9% 70% 8% 7.3% 7.1% 67.4% 65.1% 60% 54.6% 7% 50% 6% 5% 44.5% 44.5% 2014 2015 40% 4% 30% 3% 20% 2% 10% 1% 0% 0% 2011 2012 2013 2014 2015 (*) 2011 2012 2013 (1) GDP (at current prices): Data elaborated by the Provincial Office of Statistics, except for 2015. (*) GDP 2015: The Province estimates that its GDP for 2015 amounts to approximately ARS 1,675.5 billion (at current prices), taking into account the current provincial GDP for 2014 and applying estimates of inflation and growth for 2015. The Province cannot assure you that the estimated provincial GDP for 2015 calculations will be similar to any official figure that may be released, and thus the estimated GDP for such year may differ significantly from any official GDP information for that year, once calculated by the Provincial Office of Statistics pursuant to its new methodology. Source: Ministry of Economy of the Province The following table sets forth the Province’s total outstanding indebtedness from 2014 to March 31, 2016. Total Outstanding Indebtedness Outstanding principal (in millions) 2014 USD Debt in Pesos - adjusted by CER Malvinas Bond (Law Nº13,763) ............................... — 41 PYMES Bond (Law Nº12,421) ................................. Total Debt in Pesos - adjusted by CER ...................... 41 Debt in Pesos Federal Refinancing Program ................................... 3,033 2010 Financial Assistance Refinancing..................... 424 2011 Financial Assistance......................................... 54 2012 Financial Assistance......................................... 161 2014 Financial Assistance......................................... 140 2015 Financial Assistance (ARS 5.900 M) ............... — 2015 Financial Assistance (ARS 700 M) .................. — 2015 Financial Assistance (ARS 4.159 M) ............... — 2010 FFDP Loan....................................................... 15 2011 FFDP Loan....................................................... 67 Flood Relief Loan ..................................................... 41 Consolidation Bonds (Law Nº12,836) ..................... 1 Bonds Law Nº 10,328 .............................................. 0 Housing Trust Fund ................................................. 36 Treasury Bills .......................................................... 219 2015 Variation 2016 vs. 2015 ARS % ARS USD — 349 — 30 — 391 — 29 — 430 — 39 — 9.9% 349 30 391 29 430 39 9.9% 1,800 251 32 96 83 455 54 322 5 35 80 0 0 23 327 23,470 3,279 415 1,247 1,086 5,934 703 4,204 62 457 1,037 1 0 296 4,259 1,620 226 29 86 75 410 49 273 3 29 75 23,807 3,326 421 1,265 1,102 6,020 713 4,017 46 429 1,104 0 20 256 0 292 3,760 25,932 3,623 459 1,378 1,200 — — — 124.55 571.71 352 6 0 311 1,876 70 ARS March 31, 2016 USD ARS 337 47 6 18 16 86 10 (186) (16) (29) 66 (1) 0 (4) (499) 1.4% 1.4% 1.4% 1.4% 1.4% 1.4% 1.4% (4.4)% (25.3)% (6.2)% 6.4% (100.0)% (4.1)% (1.3)% (11.7)% Outstanding principal (in millions) 2014 USD Debt Cancellation Bonds due 2016 (Suppliers’ Bond) - SERIE A ..................................................... 58 Debt Cancellation Bonds due 2016 (Suppliers’ Bond) - SERIE B ..................................................... 32 Law N° 14,315-Serie A............................................ 9 Law N° 14,315-Serie B ............................................ 26 Law N° 14,315-Serie C ............................................ 46 Law N° 14,315-Serie D............................................ 41 Law N° 14,315-Serie E ............................................ — Suppliers .................................................................. — Local Program Series I class I.................................. — Local Program Series I class II ................................ — Local Program Series II class I ................................ — Local Program Series II class II ............................... — Local Program Series III .......................................... — 39 Others ...................................................................... 4,442 Total Debt in pesos ..................................................... Debt in Foreign Currency .......................................... Dollar - denominated Long Term Par Bond ............. 476 Euro - denominated Long Term Par Bond ............... 690 Dollar - denominated Medium Term Par Bond ........ 64 Euro - denominated Medium Term Par Bond .......... 696 Dollar - denominated Discount Bond....................... 167 Euro - denominated Discount Bond ......................... 84 Eurobonds (Untendered Holdings) (1) ....................... 64 USD 475 M Bond .................................................... 475 USD 400 M Bond .................................................... 400 USD 1,050 M Bond ................................................. 1,050 USD 750 M Bond .................................................... 750 USD 899 M Bond .................................................... — USD 1250 M Bond .................................................. — Multilateral Loans (IDB-World Bank) ..................... 819 Bilateral Loans (1) ..................................................... 135 USD...................................................................... 84 Yen ....................................................................... 40 Liras ..................................................................... 11 Law Nº12,973 Bond................................................. 10 200 Provincial Bond due 2016 ........................................ Total Debt in Foreign Currencies ............................. 6,079 Total Indebtedness ...................................................... 10,561 (1) Excluding past and due interest as of December 2001 2015 Variation 2016 vs. 2015 ARS % ARS USD 500 8 100 — — (100) (100.0)% 271 73 220 396 352 — — — — — — — 337 37,981 8 100 4 57 (43) (42.8)% 3 17 38 35 — 60 8 57 13 76 29 3,913 44 220 490 453 — 788 105 738 170 995 375 51,028 12 29 28 241 54 7 50 11 68 27 3,680 176 420 404 3,550 788 105 738 170 995 394 54,099 (44) (44) (70) (49) 3,550 — — — — — 19 3,070 (100.0)% (20.0)% (14.3)% (10.8)% — — — — — — 5.0% 6.0% 4,071 5,902 545 5,949 1,428 720 546 4,062 3,420 8,979 6,413 — — 7,002 1,150 717 338 95 84 1,710 51,981 488 628 64 622 100 45 59 475 400 — 750 899 — 753 133 84 39 10 3 — 5,419 6,360 8,188 831 8,106 1,306 589 764 6,194 5,216 — 9,780 11,729 — 9,825 1,736 1,094 512 129 43 — 70,665 488 658 64 651 100 47 61 475 400 — 750 899 1,250 739 136 84 42 10 3 — 6,722 7,169 9,674 936 9,576 1,472 695 898 6,983 5,880 — 11,025 13,222 18,375 10,861 2,003 1,233 617 153 48 — 98,819 810 1,486 106 1,471 166 107 134 789 664 — 1,245 1,493 18,375 1,036 267 139 105 23 5 — 28,153 12.7% 18.1% 12.7% 18.1% 12.7% 18.1% 17.5% 12.7% 12.7% — 12.7% 12.7% — 10.5% 15.4% 12.7% 20.4% 18.1% 12.7% — 39.8% 90,311 9,362 122,085 10,432 153,347 31,263 25.6% As of December 31, 2014 2013 Exchange rates ARS/USD ........................................................... ARS/JPY............................................................. ARS/CHF ........................................................... ARS/EUR ........................................................... ARS/ITL ............................................................. USD/ITL ............................................................. USD/JPY ............................................................ Accumulated CER ................................................. ARS March 31, 2016 USD ARS 6.521 0.062 7.328 8.983 0.005 0.001 0.009 3.520 71 8.551 0.072 8.646 10.396 0.005 0.001 0.008 4.377 As of March 31, 2016 2015 13.040 0.108 13.040 14.164 0.007 0.001 0.008 5.036 14.700 0.131 15.317 16.734 0.009 0.001 0.009 5.036 Source: Ministry of Economy of the Province. Causes of debt stock variation between March 31, 2016 and December 31, 2015 For the three-month period ended March 31, 2016, the Province’s indebtedness increased by ARS 31.26 billion, or 25.6%, as compared to December 31, 2015. The following table describes the increases and decreases in the Province’s outstanding indebtedness that led to the net increase in the provincial debt stock from December 31, 2015 to March 31, 2016. Causes of Debt Stock variation, March 31, 2016 vs. December 31, 2015 (in millions of nominal pesos) Variation Debt Increase ..................................................................................................... $32,917.1 Debt Issues in international capital markets ......................................... $18,136.6 Exchange Rate Effect (1) Source: (1) ...................................................................... $10,223.9 Debt Issues in domestic capital markets .............................................. $3,567.4 Interest Capitalization .......................................................................... $834.5 Disbursements of Federal Government's Loans ................................... $81.3 Inflation Effect .................................................................................... $67.9 Disbursements of Multilateral Loans ................................................... $5.5 Debt Reduction ................................................................................................. $(1,654.6) Amortization in domestic capital markets............................................ $(879.0) Amortization of Federal Government's Loans .................................... $(562.8) Amortization of Multilateral Loans .................................................... $(212.8) Debt Stock Variation ........................................................................................ 31,262.5 Includes the devaluation of the peso against the U.S. Dollar, Euro, Japanese Yen and Swiss Franc. Ministry of Economy of the Province For the three-month period ended March 31, 2016, the increases in Province’s indebtedness were mainly due to: • the issuance in the international capital markets of USD 1.25 billion 9.125% bonds due 2024 on March 16, 2016, which accounted for 55.1% of total increases during the first quarter of 2016; • ARS 10.2 billion net increase in debt as a result of the peso depreciation against the dollar, Euro and CHF, which represents 31.1% of total increases; • bonds issued in the local capital market which accounted for 10.8% of total debt increases, including the Suppliers Bonds for ARS 3.6 billion and others bonds issuances for ARS 17.4 million. • capitalized interest for ARS 834.5 million due to an extension of the grace period relating to indebtedness with the federal government, which represented 2.5% of total increases in the first quarter of 2016; • new disbursements of debt with the federal government, which represented in the aggregate 0.3% of total increases; • the disbursements of outstanding multilateral credit lines, for a total amount of ARS 5.5 million, which represented less than 0.1% of the total increase during the first quarter of 2016; and 72 • the impact of inflation on debt denominated in pesos and adjusted by CER, which accounted for an ARS 67.9 million, which represented 0.2% of the total increase during the first quarter of 2016. These increases were partially offset by the following decreases: • amortization payments of debt issued in the local capital market and other debt reductions for ARS 879.0 million. This amount includes (i) an ARS 514.9 million repayment of Treasury bills, (ii) an ARS 208.4 million repayments of bonds originally issued for the cancellation of debt with suppliers and contractors (See “—Debt Denominated in Pesos—Bonds for the Cancellation of Debts with Suppliers and Contractors – Law No. 14,315), (iii) an ARS 142.9 million repayments of bonds for the cancellation of provincial debts and (iv) an ARS 12.8 million repayments of other debts; • amortization payments of indebtedness with the federal government for ARS 562.8 million, including the first amortization payment of the 2015 Financial Assistance Agreement for ARS 501.6 million; and • repayments to multilateral credit lines totaling in the aggregate ARS 212.8 million. 73 Estimated Debt Service The following table shows projected debt service by creditor and year based on the Province’s outstanding indebtedness as of March 31, 2016. Estimated Debt Service by Creditor (1) (2) (in millions of U.S. dollars) Creditor Federal Government ....................................................... Amortization ........................................................ Interest ................................................................. Bondholders .................................................................... Amortization .......................................................... Interest ................................................................... USD ........................................................................... Amortization .......................................................... Interest ................................................................... EUR ........................................................................... Amortization .......................................................... Interest ................................................................... ARS ........................................................................... Amortization .......................................................... Interest ................................................................... ARS + CER ................................................................ Amortization .......................................................... Interest ................................................................... CHF ........................................................................... Amortization .......................................................... Interest ................................................................... Fideicomiso_ANSES ................................................. Amortization .......................................................... Interest ................................................................... Multilateral ..................................................................... Amortization .......................................................... Interest ................................................................... Bilateral .......................................................................... Amortization .......................................................... Interest ................................................................... Others ............................................................................. Amortization .......................................................... Interest ................................................................... TOTAL .......................................................................... Amortization .......................................................... Interest .................................................................. (1) (2) (3) Source: As of Mar 31, 2016 2016(3) As of December 31, 2018 2019 2020 2017 2021 2022-2038 2,894 284 40 212 161 240 140 186 121 178 111 178 100 1,617 433 505 751 464 507 779 444 491 372 860 312 778 235 2,721 679 70 265 44 391 496 390 271 331 727 280 732 207 2,089 506 32 49 124 47 217 46 217 37 131 29 44 25 592 166 402 433 295 64 65 4 1 0 1 0 0 0 0 0 0 0 28 6,660 4,435 1,402 763 29 0 10 20 1 4 1 5 1 4 2 4 2 4 2 3 11 7 93 12 110 13 85 11 83 9 74 7 59 6 234 47 787 681 1,104 595 760 502 1,112 430 1,015 341 4,572 1,159 739 136 2 2 10,432 885 804 Calculated based on the stock of debt, exchange rate and interest rates as of March 31, 2016. Data does not include any adjustment for inflation with respect to the debt denominated in CER adjusted, ICC adjusted pesos (Pesos adjusted pursuant to the Índice de Costos de la Construcción (Construction Costs Index)) or any other debt. Amortization payments include amortization of capitalized interest. Does not reflect amortization or interest payments on debt issued or refinanced after March 31, 2016. Corresponds to estimated debt service by creditor from April 1, 2016 to December 31, 2016. Ministry of Economy of the Province. 74 Pledge of Tax Co-Participation Revenues The Province has pledged a part of its federal tax transfers to secure its obligations under certain of its outstanding indebtedness, most of which is owed to the federal government. Pursuant to these security arrangements, the federal government is entitled to withhold a portion of the Province’s federal tax transfers to cover principal and interest payments on the secured debt. The following table sets forth the amount of federal tax transfers withheld to cover provincial debt service payments for each of the indicated periods. Withheld Federal Tax Transfers 2011 to March 31, 2016 (in millions of pesos) Year ended December 31, 2011 Federal Tax Co-Participation ...................... 2012 2013 March 31, 2014 2015 2015 2016 25,887 32,559 41,724 56,587 76,640 16,119 22,649 56 224 493 328 2,438 101 653 Total ....................................................... 4 60 18 242 14 507 98 426 239 2,676 211 312 13 667 Percentage Withheld ............................... 0.2% 0.7% 1.2% 0.8% 3.5% 1.9% 2.9% Withholdings Federal Government (1) ............................ Other Debt (1) (2) Source: (2) ........................................... These secured debts consisted primarily of financing provided pursuant to the Federal Refinancing Program whose grace period was extended until December 31, 2016 and the Trust Fund for Provincial Development. Consists mainly of withholdings to make debt service payments to multilateral creditors. Ministry of Economy of the Province and Banco de la Nación Argentina. Debt Denominated in CER-adjusted Pesos PyMEs Bond In May 2000, the Province implemented a financial support program for small and medium size businesses (“PyMEs”) in financial distress with outstanding bank loans from Banco Provincia. Through this program, an eligible PyME could refinance debt by extending the term of its loans to 15, 20 or 25 years and purchasing zero-coupon dollar-denominated provincial bonds issued by the Province (“PyMEs Bonds”) and depositing these bonds at Banco Provincia as collateral for its loans. At maturity, the Province would redeem PyMEs Bonds collateralizing the principal amount of the loans, which would be cancelled. Participating PyMEs may be excluded from this program if they default on their loans, in which case the PyMEs Bonds that serve as collateral for the defaulted loans will be redeemed by the Province at their then-current value. As of March 31, 2016, the aggregate nominal amount of outstanding PyMEs Bonds was ARS 0.43 billion, which, if all participating PyMEs had been excluded and all PyMEs Bonds had been redeemed, the Province would have been required to pay approximately ARS 0.14 billion to Banco Provincia. Malvinas Islands Veterans’ Debt Cancellation Bond Law No. 13,763 In January 2008, the Province enacted Law No. 13,763, pursuant to which the Province acknowledged an outstanding debt with the Malvinas Islands war veterans as a result of failing to calculate certain items in the pension provided by the Province. Law No. 13,763 established how those pension items would be calculated and provided for the mechanism to repay this debt. Law No. 13,763 also established that 10.0% of the debt would be paid in cash and the remaining 90.0% in securities (the “Malvinas Bonds”). The Malvinas Bonds were issued on September 15, 2007 and matured on March 15, 2014. The Malvinas Bonds were denominated in CER-adjusted pesos and were amortized in 72 consecutive monthly installments, consisting of 70 installments of 1.3% and two installments of 2.7%, of the principal amount plus capitalized interest through March 15, 2008. The first installment was due on April 15, 2008. Interest on the Malvinas Bonds accrued at 2.0% per annum and was capitalized on a monthly basis until March 15, 2008. 75 On March 15, 2014, the Province repaid in full all amounts due under the Malvinas Bonds. Debt Denominated in Pesos Argentine Provincial Indebtedness Federal Refinancing Program On May 10, 2010, the federal government issued Decree No. 660/10, creating the Programa Federal de Desendeudamiento de las Provincias Argentinas (Argentine Provincial Indebtedness Federal Refinancing Program, or the “Federal Debt Refinancing Program”). The Federal Debt Refinancing Program: • reduces indebtedness owed by provinces to the federal government by applying funds held in the National Treasury Contribution Fund as of December 31, 2009 to reduce, on a pro rata basis, the indebtedness of provinces that agreed to participate in the Federal Debt Refinancing Program prior to May 31, 2010; and • allows provinces to refinance indebtedness held with the federal government as of May 31, 2010 under the Ley de Responsabilidad Fiscal (Fiscal Responsibility Law), the Trust Fund for Provincial Development, the Monetary Unification Program (PUM), the Financial Assistance Program (PAF), Interest Suspension Agreements, Bogar, and Boden. On May 12, 2010, the Province indicated to the federal government that it would participate in this program. The Province and the federal government signed a bilateral agreement memorializing the Province’s participation in the Federal Debt Refinancing Program on June 23, 2010, which was approved by Provincial Decree No. 903/10 dated June 24, 2010. This agreement provided that the refinanced indebtedness would be denominated in pesos and have a grace period until December 31, 2011, after which the principal had to be repaid in 227 consecutive monthly installments of 0.439% of the principal and a final installment of 0.374% of the principal. All outstanding amounts would bear interest at an annual fixed rate of 6.0%, and interest would be capitalized until December 31, 2011. The Federal Debt Refinancing Program eliminated all provincial CER-adjusted debt owed to the federal government. The Province is required to secure amounts owed under the Federal Debt Refinancing Program by pledging federal tax co-participable funds that it is entitled to receive. The following table shows the amounts owed by the Province to the federal government under these programs as of May 31, 2010, the amount of this debt that was reduced through application of funds held in the National Treasury Contribution Fund, and the amount of debt that was refinanced through the Federal Debt Refinancing Program. Provincial Debt included in the Federal Debt Refinancing Program as of May 31, 2010 Provincial Debt Exchange (BOGAR) ........................................................................... Monetary Unification Program (BODEN 2011) ........................................................... Financial Assistance 2005 ............................................................................................ Financial Assistance 2006 ............................................................................................ Financial Assistance 2007(1) ......................................................................................... Financial Assistance 2008(1) ......................................................................................... Financial Assistance 2009(1) ......................................................................................... FFDP Loan 2008 .......................................................................................................... FFDP Loan 2009 .......................................................................................................... Outstanding principal............................................................................................ National Treasury Funds to be applied (2) ............................................................ Outstanding principal net of National Treasury Funds.................................. Exchange rate ARS /USD .......................................................................................... (1) (2) Source: At May 31, 2010 Outstanding principal (in millions) ARS USD 13,928.7 3,545.1 599.4 152.6 702.0 178.7 1,352.3 344.2 2,469.8 628.6 3,105.2 790.3 3,551.7 904.0 426.3 108.5 1,671.3 425.4 27,806.9 7,077.3 (4,134.2) (1,052.2) 23,672.7 6,025.1 3.929 Includes debt from the Interest Suspension Agreements in 2007, 2008 and 2009. Includes an additional ARS 40.8 million to the original ARS 4,093.4 million held in the National Treasury Contribution Fund due to the Province of Chubut’s refusal to participate in the program, which allowed the federal government to reallocate those funds among all the participating provinces. Ministry of Economy of the Province. 76 The debt included in this program had been incurred as follows: Following the economic crisis that began in 2001, certain debt obligations of the Province were restructured during 2002-2004 by exchanging them for BOGAR (an obligation of the federal government) and the Province became obligated to pay the federal government for the debt service on the associated BOGAR. Similarly, in 2003, under the Monetary Unification Program (“PUM”), the federal government issued BODENs in exchange for Patacones, a quasi-currency treasury bond that had been issued by the Province beginning in 2001 to pay current expenditures. From 2005 through 2009, the Province received funding from the federal government under the Financial Assistance Programs (“PAF”) (described below) in order to make debt amortization payments that were due during those years. In 2008 and 2009, the Province received loans for infrastructure through the federal Trust Fund for Provincial Development (“FFDP”). Finally, interest on PFO, PAF and PUM for 2007-2009, which had been capitalized pursuant to the federal Interest Suspension Agreements was also included. During 2002-2004, the Province also signed bi-lateral agreements with the federal government under the Orderly Financing Program (“PFO”) which provided loans to reduce provincial fiscal deficits and whereby the federal government repaid multilateral lenders on behalf of the Province. Amounts due to the federal government under these programs were settled through a 2004 debt-offsetting agreement with the federal government and refinancing agreements which have now been fully repaid. In June 2010, the federal government withheld ARS 0.33 billion of federal co-participable tax revenues to cover interest and principal payments owed on refinanced debt prior to June 23, 2010. These amounts were used to reduce amounts owed to the federal government under the Federal Debt Refinancing Program. In December 2011, pursuant to Resolution No. 33/11, the federal government amended the terms and conditions of the Federal Debt Refinancing Program and the PAF 2010. Under the new conditions, the debt outstanding under these programs would be paid in 203 consecutive and monthly installments equivalent to 0.49% of the principal each, and one last installment equivalent to 0.53% of the principal. All outstanding amounts would continue to bear interest at an annual fixed rate of 6.0% and interest would be capitalized until December 31, 2013. The grace period was extended to December 31, 2013 and the first installment would be paid in January 2014. Certain terms of the Federal Debt Refinancing Program were subsequently amended in 2013, 2014 and 2015 through the execution of several Debt Refinancing Agreements. See “—Debt Denominated in Pesos—Debt Refinancing Agreements with the Federal Government.” Financial Assistance Programs (PAFs) In August 2004, the federal government created the Régimen Federal de Responsabilidad Fiscal (Federal Fiscal Responsibility Regime), which went into effect as of January 1, 2005. The new regime establishes general rules of fiscal behavior and transparency for Argentina’s national, provincial and municipal public sectors. In addition, the federal government established, pursuant to various bilateral agreements, financing programs for those provinces that do not have other sources of funds and are in compliance with the fiscal responsibility rules established under the new regime. The Province and the federal government entered into Financial Assistance Programs for each of the years 2005 through 2007 (“Initial PAFs”). In March 2008, the federal government and the Province entered into the 2008 Financial Assistance Program (“PAF 2008”) for ARS 2.82 billion. Like the previous agreements, the PAF 2008 was entered into for purposes of making debt amortization payments due in 2008. The PAF 2008 financed approximately 96.5% of the 2008 budgeted provincial debt amortizations. In February 2009, the federal government and the Province entered into the 2009 Financial Assistance Program (“PAF 2009”) for ARS 2.93 billion. The PAF 2009 was entered into for the purpose of making debt amortization payments due in 2009, which were estimated to be ARS 2.95 billion. In this manner, the PAF 2009 financed approximately 99.3% of the 2009 budgeted provincial debt amortizations. On May 31, 2010, the entire outstanding amount due under the Initial PAFs, the PAF 2008 and the PAF 2009 was refinanced in the Federal Debt Refinancing Program. See “—Debt Denominated in Pesos—Argentine Provincial Indebtedness Federal Refinancing Program.” 77 On December 21, 2010, the federal government and the Province entered into the 2010 Financial Assistance Program (“PAF 2010”), pursuant to which the federal government granted the Province ARS 5.06 billion loans for purposes of meeting fiscal imbalances and making debt service payments. All payments under this loan were secured by federal tax co-participable funds that the Province is entitled to receive. In addition, the federal government made a payment of ARS 1.71 billion in January 2011, with funds from the National Treasury Contribution Fund to partially cancel the debt originated by the PAF 2010. On December 28, 2011, the terms applicable to the PAF 2010 were amended to provide for repayments of principal and interest on a schedule identical to the Federal Debt Refinancing Program. See “—Debt Denominated in Pesos—Argentine Provincial Indebtedness Federal Refinancing Program.” This loan was later incorporated into further debt restructuring agreements with the national government. See “—Debt Denominated in Pesos—Debt Refinancing Agreements with the Federal Government.” On December 23, 2011 the federal government and the Province entered into the 2011 Financial Assistance Program (“PAF 2011”), pursuant to which the federal government granted the Province a ARS 3.0 billion loan for purposes of addressing fiscal imbalances, treasury payment delays and making debt service payments. The PAF 2011 had to be repaid in 84 monthly and consecutive installments, with a one-year grace period, beginning in January 2013. Outstanding amounts bore interest at an annual fixed rate of 6.0%. All payments under this loan were secured by federal tax co-participation funds which the Province would be entitled to receive. The PAF 2011 also established that the federal government would transfer ARS 2.42 billion from the National Treasury Contribution Fund to the Province to partially cancel the debt originated by the PAF 2011, thus reducing the amount owed. This loan was later incorporated into further debt refinancing agreements with the national government. See “—Debt Denominated in Pesos—Debt Refinancing Agreements with the Federal Government.” On December 27, 2012, the federal government and the Province entered into the 2012 Financial Assistance Program (“PAF 2012”), pursuant to which the federal government granted the Province a ARS 1.5 billion loan for purposes of meeting fiscal imbalances and making debt service payments. This loan had to be repaid in 84 monthly and consecutive installments, with a one-year grace period, beginning in January 2014. Outstanding amounts bore interest at an annual fixed rate of 6%. All payments under this loan were secured by federal tax co-participation funds which the Province would be entitled to receive. This loan was later incorporated into further debt refinancing agreements with the national government. See “—Debt Denominated in Pesos—Debt Refinancing Agreements with the Federal Government.” On December 18, 2014, the federal government and the Province entered into the 2014 Financial Assistance Program (“PAF 2014”), pursuant to which the federal government granted the Province a ARS 1.2billion loan. This loan is scheduled to amortize in 84 consecutive monthly installments, commencing in January2016. Interest on principal would accrue at a rate of 6% per annum. All payments under this loan were secured by revenues from the federal tax coparticipation regime. This loan was later incorporated into further debt refinancing agreements with the national government. See “—Debt Denominated in Pesos—Debt Refinancing Agreements with the Federal Government.” On November 25, 2015, the federal government and the Province entered into the 2015 Financial Assistance Program (“PAF 2015”), pursuant to which the federal government granted the Province a ARS 5.9 billion loan. This loan is scheduled to amortize in 168 consecutive monthly installments, commencing in January 2017. Interest on principal accrues at a rate of 6.0% per annum. All payments under this loan are secured by revenues from the federal tax co-participation regime. On December 2, 2015, in addition to the PAF 2015, the federal government and the Province entered into a ARS 700 million loan, with the same conditions as the loan granted under the PAF 2015. In addition, on December 18, 2015, the federal government and the Province signed a Financial Assistance Agreement for ARS 4.2 billion, which will be repaid in nine monthly installments following a principal and interest grace period, which will expire on March 31, 2016. Interest will be calculated at the rate of the Internal Bills of the Central Bank of Argentina (Lebac). In January 2016, pursuant to Decree 124/16, the federal government advanced ARS 3.5 billion to the Province on account of future tax co-participation revenues, to allow the Province to pay urgent budgeted expenditures and service its debt. The advanced revenues must be repaid within the current fiscal year. The federal government may retain certain of the co-participation revenues due to the Province in order to repay the advance and accrued interests. 78 Debt Refinancing Agreements with the Federal Government 2013 Refinancing Agreement On December 27, 2013, the federal government and the Province entered into the Convenio entre la Provincia de Buenos Aires y el Gobierno Nacional (2013 Debt Refinancing Agreement with the federal government, or the “2013 Debt Refinancing Agreement”) to refinance the entire outstanding amount due under the Federal Debt Refinancing Program and the PAF 2010, PAF 2011 and PAF 2012, which was approved by Provincial Decree No. 1096/13. The total refinanced amount of the Province’s debt that was refinanced under this agreement was ARS 34,179.4 million. This agreement also established that in January 2014 the federal government would transfer to the Province funds generated by the National Treasury Contribution Fund for ARS 4.56 billion, which were used to partially cancel the refinanced debt, resulting in a net amount of ARS 29.62 billion. Pursuant to the terms of the agreement, the principal would be amortized in 201 monthly installments with a grace period on both principal and interest until March 31, 2014. All outstanding amounts bear interest at an annual fixed rate of 6.0%, and interest was capitalized until March 31, 2014. In addition, the agreement provided that the grace period for principal and capitalization of interest may be extended during 2014 if the Province provided certain information to the federal government, which the Province did. The Province is required to secure amounts owed under this agreement by pledging federal tax co-participable funds that it is entitled to receive. As of December 31, 2014, the outstanding principal amount under the 2013 Debt Refinancing Agreement was ARS 31.39 billion. 2014 Refinancing Agreement On April 28, 2014, the federal government and the Province entered into a new Convenio entre la Provincia de Buenos Aires y el Gobierno Nacional (the “2014 Debt Refinancing Agreement”), which was approved by Provincial Decree No. 303/14. Pursuant to the terms of this agreement, the grace period on both principal and interest payments under the 2013 Debt Refinancing Agreement was extended to June 30, 2014. Principal would be amortized in 198 monthly installments, with the maturity date remaining the same On July 31, 2014, the federal government and the Province modified the grace period of the 2014 Debt Refinancing Agreement (the “First Amendment”). Pursuant to the terms of this First Amendment, the grace period on both principal and interest payments was extended to December 31, 2014. Principal would amortize in 195 monthly installments, with the maturity date remaining the same. In addition, on September 30, 2014, the Province and the federal government agreed on an additional quarter to the grace period of the 2014 Debt Refinancing Agreement as amended by the First Amendment (the “Second Amendment”). As a result, the grace period on principal and interest payments was extended to December 31, 2014. The principal had to be repaid in 192 monthly installments, with the same maturity date as that of the original agreement. 2015 Refinancing Agreement On January 30, 2015, the Province and the federal government entered into a new Convenio entre la Provincia de Buenos Aires y el Gobierno Nacional (the “January 2015 Debt Refinancing Agreement”), to refinance the total debt outstanding under the previous debt refinancing agreements and the PAF 2014, which was approved by Provincial Decree No. 95/15. The total refinanced amount was ARS 32.59 billion. In addition, due to the implementation of the National Treasury Contributions for ARS 4.75 billion, which were used to partially cancel the refinanced debt, the net debt was ARS 27.84 billion as of December 31, 2014. Pursuant to the terms of the January 2015 Debt Refinancing Agreement, principal would be amortized in 189installments following a 3-month grace period on both principal and interests. Interest were capitalized during such grace period, at a fixed annual rate of 6.0%. In addition, the agreement provides that the grace period may be extended during 2015 if the Province provides certain information to the federal government. Debt services are secured by the revenues of the Province from the federal tax co-participation regime. 79 Debt Refinancing Agreement with the Federal Government Dated Argentine Provincial Indebtedness Federal Refinancing Program (PFD) Federal government withhold of co-participation tax revenues Capitalized Interest PDF Financial Assistance 2010 2011 National Treasury Funds to be applied Capitalized Interest AF 2010 2011 Debt Restructuring Agreement with Federal Government Financial Assistance 2011 Financial Assistance 2012 Capitalized Interest 2013 2013 Debt Restructuring Agreement with Federal Government 2013 National Treasury Funds to be applied Net 2013 Debt Restructuring Agreement with Federal Government Capitalized Interest 2014 2014 Debt Restructuring Agreement with Federal Government Financial Assistance 2014 Federal government withhold of co-participation tax revenues 2014 National Treasury Funds to be applied Capitalized Interest Argentine Provincial Indebtedness Federal Refinancing Program (PFD) Capitalized Interest Argentine Provincial Indebtedness Federal Refinancing Program (PFD) May 31, 2010 Jun 30, 2010 Dec 31, 2011 Dec 31, 2011 2011 Dec 31, 2011 Dec 31, 2011 Dec 31, 2011 Dec 31, 2012 Dec 31, 2013 Dec 31, 2013 January 2014 January 2014 Dec 31, 2014 Dec 31, 2014 Dec 18, 2014 January 2015 January 2015 Dec 31, 2015 Dec 31, 2015 Mar 31, 2016 Mar 31, 2016 As of Mar 31, 2016 (In millions) ARS USD 23,672.7 1,610.4 (330.8) (22.5) 2,324.7 158.1 5,061.8 344.3 (1,706.0) (116.1) 207.9 14.1 29,230.2 1,988.5 499.7 34.0 1,500.0 102.0 2,949.4 200.6 34,179.4 2,325.1 (4,556.8) (310.0) 29,622.6 2,015.1 1,768.6 120.3 31,391.1 2,135.5 1,200.0 81.6 (8.3) (0.6) (4,747.3) (322.9) 1,661.9 113.1 29,497.4 2,006.6 423.3 28.8 29,920.8 2,035.4 Source: Ministry of Economy of the Province. On May 12, 2015, the Province and the federal government entered into a new Convenio entre la Provincia de Buenos Aires y el Gobierno Nacional (the “May 2015 Debt Refinancing Agreement”), to refinance the total debt outstanding of ARS 28.23 billion as of March 31, 2015 under the same conditions as the January 2015 Debt Refinancing Agreement. On July 8, 2015, Provincial Decree No. 542/15approved the May 2015 Debt Refinancing Agreement. On August 20, 2015, the Province and the federal government entered into a new Convenio entre la Provincia de Buenos Aires y el Gobierno Nacional (the “August 2015 Debt Refinancing Agreement”), to refinance the total outstanding debt of ARS 28,648 million as of June 30, 2015, which was approved by Provincial Decree No. 1035/15. Pursuant to the terms of the August 2015 Debt Refinancing Agreement, principal will be amortized in 183 installments following a three-month grace period on both principal and interest until September 30, 2015. Interest will be capitalized during such grace period, and then payable on a monthly basis. The outstanding amounts will accrue interest at a fixed annual rate of 6%. In addition, the agreement provides that the grace period may be extended during 2015 as long as the Province continues to provide certain information to the federal government. Debt services are secured by the revenues of the Province from the federal tax co-participation regime. On November 25, 2015, the Province and the federal government entered into a new Convenio entre la Provincia de Buenos Aires y el Gobierno Nacional (the “November 2015 Debt Refinancing Agreement”), to refinance the total outstanding debt of ARS 29.07 billion as of September 30, 2015, which it is expected to be approved by a Provincial Decree. Pursuant to the terms of the November 2015 Debt Refinancing Agreement, principal will be amortized in 168 installments following a fifteen-month grace period on both principal and interest until December 31, 2016. Interest will be capitalized during such grace period, and then payable on a monthly basis. The outstanding amounts will accrue interest at a fixed annual rate of 6%. As of March 31, 2016, the outstanding principal amount under the 2015 Debt Refinancing Agreement was ARS 29.92 billion. Trust Fund Loan for Provincial Development In May 2010, the Province and the federal government entered into a new loan agreement under the Trust Fund for Provincial Development for ARS 0.30 billion to be allocated to social services and basic social infrastructure works. This loan will be repaid over five years in 60 consecutive and equal monthly installments beginning January 2012, and 80 will accrue interest at an annual nominal fixed rate of 7.0%. The interest due on this loan was capitalized through and including December 31, 2010 and the first interest payment was on January 2011. All of the payments under this loan are secured by federal tax co-participable funds that the Province is entitled to receive. This loan was disbursed in June 2010 and as of March 31, 2016 its outstanding principal amount was ARS 0.05 billion. On December 23, 2011, the Province signed a new loan agreement under the Trust Fund for Provincial Development for ARS 800 million to cover teachers’ salaries and social plans. This loan will be repaid over 84 monthly and consecutive installments, with a one year grace period, beginning in January 2013. Outstanding amounts bear interest at an annual fixed rate of 6.0%. Interest was capitalized until December 31, 2011 and the first interest payment was on January 31, 2012. As of March 31, 2016, the outstanding principal amount under this loan was ARS 0.43 billion. Debt Consolidation (Law No. 12,836, as amended by Law No. 13,436) In 2001, the Province established procedures for the consolidation of the Province’s obligations to claimants who have prevailed in legal actions brought against the Province or its municipalities arising from events that occurred from April 1, 1991 through November 30, 2001. These procedures permit the issuance by the Province of a bond (“Boconba 12,836”) to the claimants to extinguish their debt. Boconba 12,836 was issued in November 2001 with a 16-year maturity. The bonds are denominated in pesos and accrue interest at the rate Tasa Encuesta as published by the Central Bank. The Tasa Encuesta is the average annual interest rate paid on savings accounts. Accrued interest was capitalized during the 72-month period immediately following the issuance date and payable monthly thereafter. Principal amounts (including capitalized interest) are payable in 120 consecutive monthly installments that began on December 30, 2007. On October 26, 2004, however, the Supreme Court of Argentina declared this debt consolidation process invalid because: (i) it differed from the national debt consolidation regime in that it provided no cash payment option; (ii) the provincial bonds have a longer maturity than the national debt consolidation bond; and (iii) the aggregate amount of the provincial bonds is capped. In response to the Supreme Court of Argentina ruling, the provincial legislature amended the provincial debt consolidation process by establishing a cash payment option, prioritizing the payments by source, reducing the maturity on the provincial bonds to 170 months and the amortization schedule to 98 monthly installments and eliminating the bond issuance cap, which originally amounted to 15.0% of the budgeted revenues for the central administration, effective upon the issue date. In addition, the provincial legislature established a voluntary early redemption option at technical value for the original holders of the Boconba 12,836 who received their bonds when no cash payment option was available. As a result of the modifications by the provincial legislature, the provincial executive was able to proceed with the issuance of Boconba 12,836. The early redemption option for the Boconba 12,836 was exercisable only once, from April 3 through May 31, 2006. All redemption requests were satisfied for a total amount of ARS 7.7 million. Requests for cash payments are organized according to the established criteria in the applicable regulations. Amounts are cancelled in the quarter in which payment is made until the quarterly budget for cash payments is exhausted. Any payments that are not made during a particular quarter are added to those requests for cash payments submitted in the following quarter. The Boconba 12,836 has been repaid in full on January 31, 2016. Federal Trust Fund for Regional Infrastructure In 1997, the federal government created the Fondo Fiduciario Federal de Infraestructura Regional (the Federal Trust Fund for Regional Infrastructure, or “FFFIR”) to finance provincial infrastructure projects and other public works in order to promote regional economic development and increase national economic productivity. The 81 Province has entered into sixteen loan agreements with the FFFIR, of which eight are allocated to improve public roadways, two are intended to renew and expand a port within the Province, four are allocated to build city halls, one aimed at improving the water and sanitary system and one aimed at financing a land reclamation project. As of March 31, 2016, the Province had received approximately ARS 321.170 million under these agreements and the aggregate outstanding amount was equal to approximately ARS 298.06 million, of which approximately 99.9% was denominated in pesos adjusted by the Índice del Costo de la Construcción (Construction Price Index) and 0.1% was denominated in normal pesos. All payments under these loans are secured by federal tax co-participable funds that the Province is entitled to receive. Fund for the Transformation of the Provincial Public Sectors In 1993, the federal government created the Fondo para la Transformación del Sector Público Provincial (Fund for the Transformation of the Provincial Public Sectors, or “FTSP”) for the purpose of extending loans to finance tax reforms, personnel restructuring and the improvement of the public sector. In 2003, the FTSP extended the Province a ARS 6 million 10-year loan, which is secured by federal co-participation tax revenues owed to the Province, for purposes of investments in public health, security and education services. As of March 31, 2016, the FTSP had disbursed 100% of this loan and the aggregate outstanding principal amount owed to the FTSP was ARS 0.02 million. ANSeS Housing Plan and Housing Trust Fund. In 2009, ANSeS provided the Province with a ARS 350 million line of credit to build homes pursuant to a federal housing program for a two-year term as from the date of the principal disbursement of the loan, accruing interest on a quarterly basis at a rate of BADLAR plus 3.5% from the date of disbursement. Pursuant to the 2010 Budget Law, the executive branch is authorized to create a trust to issue bonds for up to ARS 950 million. According to Provincial Decree No. 1,507/09, ARS 350 million was authorized in order to refinance the loan with ANSeS. In April 2011, debt securities for ARS 350 million due in 2026 were issued under this trust fund. These securities accrue interest at the BADLAR rate of public banks plus 2.0%, and amortize on a quarterly basis. The first installment was paid in October 2011. The use of proceeds was used to cancel the loan granted by ANSeS. Payments under these securities are secured by federal tax co-participable funds that the Province is entitled to receive. As of March 31, 2016, the aggregate outstanding principal amount was ARS 292.04 million. Bonds for the Cancellation of Obligations with Agents and Ex-Agents of the Accounting Tribunal, General Legal Advisor to the Executive Branch of the Province, General Accounting Office of the Province and General Treasury (BOTACOTE). In September 2010, in accordance with Decree 820/10, BOTACOTE with a face value of ARS 78.1 million were delivered to current and former employees in the Accounting Tribunal, the General Legal Advisor to the Executive Branch of the Province, the General Accounting Office of the Province and the General Treasury in order to retroactively pay bonuses owed to those employees, pursuant to the provincial law which restores and realigns the agents’ hierarchy and compensation in these five offices. The BOTACOTE had an issue date of January 10, 2010, and all amortizations and interest accrual were made retroactive to that date. Accordingly, BOTACOTE were repaid in 48 consecutive and equal monthly installments. The first nine installments were paid in October 2010. BOTACOTE accrued interest at an annual rate of 5.0%. The bonds matured on January 10, 2014 and were repaid in full. Bonds Law 10,328 In November 2006, pursuant to Law No.13,576, the Province created the Plan de Adecuación Salarial del Personal de Vialidad (Wage Plan Adequacy for Road Personnel) applicable to certain road personnel covered by Provincial Law No.10,328. This Wage Plan Adequacy for Road Personnel authorized the Province to issue bonds for a nominal value of ARS 20 million to cancel obligations with such personnel. As of March 31, 2016, there was only one subscription of ARS 0.02 million. 82 Treasury Bills In 2010, the Province began to use treasury bills as a new short-term financing instrument (the “Treasury Bills”). The 2010 provincial budget established a cap of ARS 2.50 billion nominal amount outstanding under these instruments in 2010. The Treasury Bills must be fully amortized within a year of their issuance and their repayment is guaranteed with federal tax co-participation revenues to which the Province is entitled. If Treasury Bills are not fully amortized within the fiscal year of their issuance, they are automatically converted into outstanding indebtedness for the previous fiscal year. The Treasury Bills can be issued with a discount or with an interest coupon, in local or foreign currency, with a single amortization at maturity. The Treasury Bills are listed on the Buenos Aires Stock Exchange and the MAE, and were rated “B3” by Moody’s Latin America on the Global Local Currency Instruments scale, and Baa3.ar on the Argentine Instruments scale. The General Provincial Treasury Office authorized the issuance of up to 16 tranches of Treasury Bills in 2010, all of which were issued. As of December 31, 2010, ARS 1.11 billion nominal amount of Treasury Bills not amortized within fiscal year 2010 were converted into outstanding indebtedness for 2010. As of June 9, 2011, that aggregate outstanding amount of Treasury Bills had been cancelled. Law No. 14,199 (the “2011 Budget Law”) authorized the Province to issue up to ARS 3.0 billion of Treasury Bills in 2011, however, Resolution 185/10 of the General Provincial Treasury Office authorized the issuance of only ARS 2.0 billion of Treasury Bills. As of December 31, 2011, ARS 1.66 billion nominal amount of Treasury Bills not amortized within fiscal year 2011 were converted into outstanding indebtedness for 2011. Law No. 14,331 (the “2012 Budget Law”) authorized the Province to issue up to ARS 3.0 billion of Treasury Bills in 2012. Resolution No. 214/11 of the General Provincial Treasury Office authorized the issuance of only ARS 2.5 billion of Treasury Bills. Resolution No. 52/12 of the General Provincial Treasury Office increased this amount in ARS 500 million, reaching the ARS 3.0 billion authorized by the 2012 Budget Law. However, Law No. 14,357 authorized the Province to issue Treasury Bills for an additional ARS 2.2 billion and Resolution No. 125/12 of the General Provincial Treasury Office authorized the issuance of such additional amount. As of December 31, 2012, ARS 3.14 billion of Treasury Bills not amortized within fiscal year 2012, were converted into outstanding indebtedness for 2012. The 2013 Budget Law authorized the Province to issue up to ARS 3.0 billion. In addition, the Permanent Complementary Budget Law authorized the issuance of additional Treasury Bills to cancel the Treasury Bills issued in 2012. Resolution No. 276/12 of the General Treasury Office authorized the issuance of Treasury Bills for up to ARS 5.59 billion. As of December 31, 2013, ARS 2.8 billion of Treasury Bills not amortized within fiscal year 2013 were converted into outstanding indebtedness for 2013. The 2014 Budget Law authorized the Province to issue up to ARS 1.5 billion in Treasury Bills. In addition, the Permanent Complementary Budget Law authorized the issuance of additional Treasury Bills to cancel the Treasury Bills issued in 2013, and the General Treasury Office authorized the issuance of Treasury Bills for up to ARS 4.33 billion for this purpose. As of December 31, 2014, ARS 1.88 billion of Treasury Bills not amortized within fiscal year 2014 were converted into outstanding indebtedness for 2014. The 2015 Budget Law authorized the Province to issue up to ARS 2.5 billion in Treasury Bills. In addition, the Permanent Complementary Budget Law authorized the issuance of additional Treasury Bills to cancel the Treasury Bills issued in 2014. Resolution No. 942/14 of the General Treasury Office authorized the issuance of Treasury Bills for up to ARS 4.37 billion for this purpose. As of December 31, 2015 ARS 4.26 billion of Treasury Bills not amortized within fiscal year 2015 were converted into outstanding indebtedness for 2016. The 2016 Budget authorized the Province to issue up to ARS 3.0 billion in Treasury Bills. In addition, the Permanent Complementary Budget Law authorized the issuance of additional Treasury Bills to cancel the Treasury Bills issued in 2015. Resolution No. 17/16 of the General Treasury Office, modified by Resolution 64/17 authorized the issuance of Treasury Bills for up to ARS 7.26 billion for this purpose As of the date of this offering memorandum, the Province has issued the following Treasury Bills in 2016: 83 First Tranche (issued on January 4, 2016): Type Discount BADLAR-adjusted BADLAR-adjusted BADLAR-adjusted Rate 32.00% BADLAR + 4.75% BADLAR + 4.50% BADLAR + 4.75% Amount ARS 2,306.10 million ARS 564.75 million ARS 41.50 million ARS 51.00 million Maturity February 11, 2016 April 7, 2016 June 16, 2016 December 1, 2016 Amount ARS 725.13 million ARS 127.48 million ARS 207.40 million ARS 185.06 million Maturity March 10, 2016 April 7, 2016 July 14, 2016 November 10, 2016 Amount ARS 1,504.91 million ARS 24.59 million ARS 592.46 million ARS 270.13 million Maturity April 7, 2016 May 12, 2016 August 11, 2016 December 15, 2016 Second Tranche (issued on January 14, 2016): Type Discount Discount BADLAR-adjusted BADLAR-adjusted Rate 30.00% 30.00% BADLAR + 4.25% BADLAR + 4.50% Third Tranche (issued on February 11, 2016): Type Discount Discount BADLAR-adjusted BADLAR-adjusted Rate 29.35% 28.13% BADLAR + 4.50% BADLAR + 4.50% Fourth Tranche (issued on March 10, 2016): Type Discount Discount BADLAR-adjusted BADLAR-adjusted Rate 35.00% 34.00% BADLAR + 5.00% BADLAR + 4.49% Amount ARS 725.06 million ARS 21.73 million ARS 138.75 million ARS 16.02 million Maturity May 12, 2016 June 9, 2016 September 15, 2016 March 9, 2017 Amount ARS 984.66 million ARS 4.44 million ARS 38.65 million Maturity June 9, 2016 July 14, 2016 September 15, 2016 Amount ARS 751.14 million ARS 118.74 million Maturity July 14, 2016 August 11, 2016 Fifth Tranche (issued on April 6, 2016): Type Discount Discount BADLAR-adjusted Rate 33.75% 33.00% BADLAR + 3.00% Sixth Tranche (issued on May 12, 2016): Type Discount Discount Source: Rate 35.50% 34.00% Ministry of Economy of the Province. 84 As of the date of this offering memorandum, the outstanding principal amount of Treasury Bills is ARS 6.33 billion. Bonds of the Province of Buenos Aires – Section 45, Law No. 14,062 In December 2010, in accordance with Section 45 of the 2010 Budget Law, the Province issued bonds with a face value of ARS 133.5 million to the pension fund for Banco Provincia personnel. These bonds were issued to repay funds advanced by Banco Provincia to the pension fund from 2000 to 2008 to cover financial imbalances in the fund. Law No. 14,062 Bonds had an issue date of September 20, 2010, and all amortizations and interest accrual were made retroactive to that date. Interest on Law No. 14,062 Bonds is paid quarterly at an annual interest rate of 6.0%. These bonds are repaid in 40 consecutive and equal quarterly installments and mature on September 20, 2020. The first installment on these bonds was paid on December 20, 2010. As of March 31, 2016, the outstanding principal amount of the Law No. 14,062 Bonds was ARS 60.06 million. Bonds for the Cancellation of Provincial’s Debts – Decree No. 557/12 In August 2012, the Province issued debt cancelation bonds to regularize treasury payment delays, with a total face value of ARS 0.90 billion. Two series of bonds were issued, A and B, which were repaid in 18 monthly and consecutive installments, after a three month-grace period. The A series accrued interests at the BADLAR rate. The B series accrued interest at the BADLAR rate plus 200 basis points. On May 1, 2014, the Province repaid in full all amounts due under these Bonds. Bonds for the Cancellation of Provincial’s Debts – Decree No. 648/12 In October 2012, the Province issued debt cancelation bonds to regularize treasury payment delays, for a total aggregate amount of ARS 1.00 billion. Two series of bonds were issued, A and B, which were repaid in 18 monthly and consecutive installments, after a three-month grace period. The A Series accrued interest at BADLAR rate. The B Series accrued interest at the BADLAR rate plus 200 basis points. The bonds matured on July 1, 2014 and were repaid in full. Bonds for the Cancellation of Provincial’s Debts – Decree No. 1285/13 In December 2013, the Province enacted the Provincial Decree No.1285/13, which authorized the issuance of a new debt cancelation bond to regularize treasury payment delays, for a total aggregate amount of ARS 1.5 billion, in two series: Series A was issued on March 14, 2014, and Series B were issued on July 14, 2014. Both series will be repaid in 21 monthly and consecutive installments, after a grace period of three months, and accrue interest at BADLAR rate. As of March 31, 2016, there were subscriptions of ARS 1.0 billion, and the outstanding principal amount was ARS 57.11 million. Bonds for the Strengthening of the Municipal Finances – Law No. 14,357 In December 20, 2012, in accordance with Section 26 of Law No. 14,357, the Province issued bonds for ARS 0.20 billion to help strengthen the municipal finances. These bonds were repaid in 18 monthly and consecutive installments, after a three-month-grace period. The proceeds of these bonds were transferred to the municipalities in accordance with unique distribution coefficients, based on which co-participable revenues are transferred. Debt services were paid with general provincial revenues. The bonds matured on September 20, 2014 and were repaid in full. Bonds for the Cancellation of Debts with Suppliers and Contractors – Law No. 14,315 Law No. 14,315 established the issuance of a bond for up to ARS 1.1 billion to cancel obligations with suppliers and contractors resulting from construction, complementary works and work maintenance of Provincial Route No. 6. Such bonds were issued in three series on November 1, 2012 for ARS 0.22 billion, on March 1, 2013 for ARS 0.44 billion and on March 1, 2014 for ARS 0.44 billion. The term for all of the series is three years, payable in quarterly installments. The last two series include a grace period of two quarters. Interest is payable on a quarterly basis and accrues at the BADLAR rate. As of the date of this offering memorandum, the three series have been fully subscribed. On November 1, 2015 and on March 1, 2016 the “Bonds Law No. 14,315 – Series A and B” were repaid in full, respectively. 85 In addition, section 43 of the 2014 Budget Law established an additional amount of ARS 0.70 billion to the already budgeted amount under Law No. 14,315. In this regard, Provincial Decree No. 683/14 provided for the issuance of the “Bond Law No. 14,315 - Series D”, for a period of three years and repayable in quarterly installments, with a grace period of two quarters. Interest is payable on a quarterly basis over the BADLAR rate in pesos. This Series D bonds were issued on September 1, 2014. As of the date of this offering memorandum, the Series D have been fully subscribed. Section 39 of the 2015 Budget Law increased the aggregate amount established under Law No. 14,315 by an additional ARS 0.70 billion for a total of ARS 2.5 billion. Provincial Decree No. 45/15 authorized the issuance of the “Bond Law No. 14,315 – Series E”, for a period of three years and repayable in quarterly installments, with a grace period of two quarters. Interest is payable on a quarterly basis on the basis of the BADLAR rate in pesos. The Series E bonds were issued on February 1, 2015. As of the date of this offering memorandum, there have been subscriptions for ARS 0.5 billion. As of March 31, 2016, the outstanding principal amount of the C, D and E series of bonds was ARS 1.00 billion. La Plata Flood Relief Agreement The natural disaster which took place on April 2, 2013, damaged the infrastructure of the city of La Plata, capital of the Province. As a result, pursuant to Law No. 14,527, the executive branch incurred debt in an amount of ARS 1.97 billion to finance the reconstruction of all damaged infrastructure and undertake any other measure necessary to mitigate the potential future damage that may occur due to heavy rainfall in the area. On October 22, 2013, the Province and the federal government signed a Framework Agreement whereby the federal government commits itself to financially assist the Province in implementing the Public Work Plan approved by Law No.14,527. On February 14, 2014, the Province and the federal government signed a Financing Agreement which established the financial terms and conditions of the loan from the federal government. It will be repaid in one installment after 3 years from each disbursement and will accrue interest at an annual rate of BADLAR plus 1.0%. All payments under this loan are secured by federal tax co-participable funds that the Province is entitled to receive. As of March 31, 2016, a total of ARS 1.1 billion had been disbursed under this loan. Public Debt Issuance Program in the Local Capital Markets for 2015 Pursuant to Provincial Decree No. 46/15, the Province created the “Public Debt Issuance Program in the Local Capital Markets for 2015” for a total amount up to ARS 2.0 billion. Banco de la Provincia de Buenos Aires is acting as bookrunner. On February 11, 2015, the Province issued the first series of bonds pursuant to this program. The terms and conditions were approved by Resolution No. 27/15. The first series included two classes of bonds: • Class I: Issuance of ARS 787.7 million, with a term of 18 months. Principal will be repaid in a single installment at maturity and interest is paid on a quarterly basis. The first three interest payments will be calculated at a fixed rate of 27.5%; whereas the remaining will be calculated at a variable rate, which will be determined at BADLAR rate plus 6.35%. • Class II: Issuance of ARS 105.2 million, with a term of 24 months. Principal will be repaid at maturity in a single installment. Interest will be paid on a quarterly basis, at BADLAR rate plus 6.7%. On May 18, 2015, the Province issued the second series of bonds pursuant to this program. The terms and conditions were approved by Resolution 88/15. The second series include two classes of bonds: • Class I: issuance of ARS 564.1 million, with a term of 18 months. Principal will be repaid in a single installment at maturity and interest is paid on a quarterly basis. The first three interest payments will 86 be calculated at a fixed rate of 26.9875% whereas the remaining will be calculated at a variable rate, which will be determined at BADLAR rate plus 6.25%. • Class II: Issuance of ARS 169.7 million, with a term of 24 months. Principal will be repaid in four equal installments together with the last four interest payments. The first three interest payments will be calculated at a fixed rate of 26.9875% whereas the remaining will be calculated at a variable rate, which will be determined at BADLAR rate plus 6.25%. On June 18, 2015, the Province reopened the issuance of the Series II – Class I bond through a private placement for ARS 174.3 million. On July 8, 2015, pursuant to Decree No.546/15, the Province increased the local Public Debt Issuance Program for 2015 by ARS 3.0 billion and issued the Series III bonds. The terms and conditions were established pursuant to Resolution No.145/15 and ARS 812 million principal amount of this Series III were issued for a term of 18 months. Principal will be repaid at maturity and interest is paid on a quarterly basis. The first three interest installments will be calculated at 28.5%, while the remaining at a 5.0% plus BADLAR rate. On August 25, 2015, resolution No. 162/15 established the reopening of the Series III for ARS 187.9 million. As of the date of this offering memorandum, there have been subscriptions of ARS 995 million. Bonds of Province of Buenos Aires with maturity date on December 30, 2015 On April 10, 2015, pursuant to Provincial Decree No. 115/15, the Province issued “Bonds of Province of Buenos Aires with maturity date on December 30, 2015” for a total amount up to ARS 1.20 billion. With a 26.4375% interest rate. The bonds matured on December 30, 2015 and were repaid in full. Suppliers Bond On February 5, 2016, the Province issued a bond pursuant to Provincial Decree No. 62/16, for a nominal value of ARS 8 billion, with the purpose of cancelling amounts due by the General Treasury. The bonds have a term of 24 months and accrue interest at the BADLAR rate. As of March 31, 2016, the outstanding principal amount of these bonds was ARS 3.55 billion. As of the date of this offering memorandum, there have been subscriptions of ARS 7.83 billion for these bonds. Debt Denominated in Foreign Currencies Exchange Bonds In November 2005, the Province launched an offer to the holders of its outstanding Eurobonds, which had been in default since December 2001, to exchange these bonds for three series of newly issued bonds at a specified exchange ratio that recognized a portion of the accrued and unpaid interest on the Eurobonds. The aggregate principal amount of Eurobonds outstanding at the time of the offer was approximately USD 2.70 billion, denominated in dollars, euros, yen and Swiss francs. Holders of approximately 93.7% of the aggregate outstanding principal amount of Eurobonds tendered their bonds in the offer, which expired in December 2005. As a result, in January 2006, the tendered Eurobonds were cancelled and, in exchange, the Province issued the following “Exchange Bonds”: • USD 0.50 billion aggregate principal amount of Discount Bonds due April 15, 2017 (“Discount Bonds”), denominated in both dollars and euros, with semi-annual payments of principal, commencing on October 15, 2012 and bearing interest on the outstanding principal amount from December 1, 2005 at an annual rate of 9.2% for the series in dollars and 8.5% for the series in euros, payable every six months on April 15 and October 15, calculated on the basis of a 360 day year; 87 • USD 0.75 billion aggregate principal amount of Medium Term Par Bonds due May 1, 2020 (“Medium Term Par Bonds”), denominated in both dollars and euros, with semi-annual payments of principal, commencing on November 1, 2017, and bearing interest on the outstanding principal amount at an annual rate of 1.0% on the outstanding principal amount from December 1, 2005 until November 1, 2009, 2.0% from November 2, 2009 to November 1, 2013, 3.0% from November 2, 2013 to November 1, 2017, and thereafter 4.0% until maturity, payable every six months on May 1 and November 1, calculated on the basis of a 360 day year; and • USD 1.06 billion aggregate principal amount of Long Term Par Bonds due May 15, 2035 (“Long Term Par Bonds”), denominated in dollars and euros, with semi-annual payments of principal, commencing on November 15, 2020, and bearing interest on the outstanding principal amount at an annual rate of 2.0% from December 1, 2005 until November 15, 2007, 3.0% from November 16, 2007 to November 15, 2009, and 4.0% thereafter, payable every six months on May 15 and November 15, calculated on the basis of a 360 day year. In addition, after the closing of the exchange offer, the Province continued receiving requests from bondholders who, for various reasons, had not been able to tender their holdings into the exchange. As of March 31, 2016, 97.6% of the existing Eurobonds had been exchanged for Exchange Bonds, the aggregate principal amount of Exchange Bonds outstanding was ARS 29.52 billion, and the aggregate principal amount of Eurobonds that have not been exchanged was ARS 0.90 billion. The table below provides a summary of the total issuance of Exchange Bonds: Currency USD Euro Maturity 15-Apr-2017 15-Apr-2017 Amount 333,893,191 138,536,283 Interest rate Fixed, 9.25% Fixed, 8.50% Interest payment frequency semi-annually semi-annually Payment days 15/Apr and 15/Oct 15/Apr and 15/Oct Medium Term Par USD Euro 01-May-2020 01-May-2020 63,699,456 572,261,329 Step up, from 1 to 4% Step up, from 1 to 4% semi-annually semi-annually 1/May and 1/Nov 1/May and 1/Nov Long Term Par USD Euro 15-May-2035 15-May-2035 488,427,963 578,248,613 Step up, from 2 to 4% Step up, from 2 to 4% semi-annually semi-annually 15/May and 15/Nov 15/May and 15/Nov Discount Source: Ministry of Economy of the Province. Post-restructuring issued Eurobonds In 2006, the Province accessed the international credit markets by issuing a new bond under the borrowing authorization provided by Laws No. 13,403 (the “2006 Budget Law”) and No. 13,526, which amended the 2006 Budget Law, and Decree No. 2,546/06. This bond was issued in October 2006 in an aggregate principal amount of USD 475 million and is due in 2018. The bond has an annual coupon of 9.375% and a single amortization at maturity. Interest on these bonds is paid semiannually in March and September of each year. On April 18, 2007, the Province decided to again access the international capital markets. Pursuant to Law No. 13,612 (the 2007 Budget Law) and Decree No. 63/07, the Province issued USD 0.40 billion of bonds due in 2028. These bonds have a 9.625% coupon and amortize in equal amounts during the final three years of the bonds before maturity. Interest on these bonds is paid semiannually in April and October of each year. On October 5, 2010, the Province issued bonds due 2015 for USD 0.55 billion. This issuance was reopened on October 20, 2010 and on July 21, 2011, and an additional USD 0.50 billion of bonds were issued, for an aggregate total principal amount of USD 1.05 billion. The bonds issued in 2010 and 2011 were issued under the borrowing authorization provided by the 2010 Budget Law and Decree No. 449/10, and by the 2011 Budget Law and Decree No. 2,962/10, respectively. The bonds have a coupon of 11.75% and amortize in a single payment upon maturity. Interest on the bond is paid semiannually in April and October of each year. These bonds were fully repaid. On January 26, 2011, the Province issued bonds due in 2021 for USD 0.75 billion. The bonds were issued under the borrowing authorization provided by the 2011 Budget Law and Decree No. 2,962/10. These bonds have a coupon of 10.875% and amortize in equal amounts in each of the three last years. Interest on the bonds is paid semiannually in January and July of each year. 88 Liability management transaction On June 9, 2015, the Province issued USD 500 million principal amount of its 9.95% Notes due 2021. On June 11, 2015, the Province closed a global exchange offer to exchange up to USD 500 million of its outstanding USD 11.75% Notes due 2015 for additional 9.95% Notes due 2021. As a result of the exchange offer, the Province cancelled approximately USD 380 million aggregate principal amount of its USD 1.05 billion 11.75% Notes due 2015 and issued approximately USD 400 million aggregate principal amount of additional 9.95% Notes due 2021, which represented an additional issuance that was consolidated, forms a single series and is fully fungible with the Province’s outstanding 9.95% Notes due 2021 that were previously issued for cash on June 9, 2015. The 9.95% Notes due 2021 are listed on the Luxembourg Stock Exchange and admitted to trade on the Euro MTF Market and are listed on the MERVAL and MAE. Bond Issuance in the international capital markets in 2016 On March 16, 2016, the Province of Buenos Aires issued USD 1.25 billion principal amount of its 9.125% Notes due 2024 in the international capital markets pursuant to the indebtedness authorization provided by the 2016 Budget. The 2024 Notes will be repaid in three installments during the last three years and will bear interest at the annual rate of 9.125%, payable on March 16 and September 16 of each year. As of March 31, 2016, the aggregate outstanding principal amount of these bonds was ARS 18.38 billion. Multilateral Loans The World Bank and the IDB have extended several credit facilities to finance various projects in the Province, such as road construction, water and wastewater infrastructure, public administration strengthening, and education and health reforms. The latest maturity under these credit facilities occurs in 2038. In most cases, these facilities are extended to the federal government, which makes the proceeds available to the relevant provincial agencies or entities. In March 2005, the World Bank extended the Province a direct loan for USD 0.20 billion to finance the first phase of a program aimed at improving the provision of water, wastewater system and provincial roads. The second phase of the program was financed with a new loan from the World Bank for USD 270 million. As of March 31, 2016, the total amount had been disbursed under these loans. In addition, in November 2006 a new direct loan for USD 0.230 billion was extended to the Province by the IDB to finance education, health and social assistance services. As of March 31, 2016, USD 0.23 billion had been disbursed under this loan. In addition, two loan agreements were signed in 2009, one with the IDB (Municipal Management Improvement) and the other with the World Bank (Municipal Basic Services Program). These two lending programs together total USD 40 million. As of March 31, 2016, USD 4.3 million had been disbursed under the IDB loan and USD 6.2 million under the Municipal Basic Services Program. In addition, a USD 25 million loan (Citizen Security and Inclusion) was approved by the Governor of the Province on June 14, 2010. As of March 31, 2016, USD 11.7 million had been disbursed. As of March 31, 2016, the Province had obtained 19 multilateral credit facilities, of which 9 are direct loans to the Province with the federal government acting as guarantor, and the remaining 10 are subsidiary lending arrangements through credit facilities extended to the federal government. Under the subsidiary lending arrangements, the federal government is the direct obligor rather than the guarantor, and the Province has a subsidiary obligation to reimburse the federal government for any repayments made under the facilities. Under either arrangement, the Province’s obligation to reimburse the federal government is secured by a portion of the federal tax co-participation transfers to which the Province is entitled. In addition, the proceeds of three credit facilities extended by the IDB and the World Bank have been made available to the municipalities through further subsidiary lending arrangements. In December 2014, the Province signed a new loan agreement with the IDB under the Reconquista River Environmental Sanitation Program for a total amount of USD 0.23 billion. As of March 31, 2016, USD 4.5 million had been disbursed. In December 2014, the provincial legislature enacted Decree No. 1595/14 which approved a new project related to the construction of a drinking water pipeline in the city of Bahia Blanca, which involved a new financing of USD 0.15 billion from the Latin American development bank Corporación Andina de Fomento (“CAF”). On 89 September 11, 2015, the agreement was signed. As of the date of this offering memorandum, no disbursements have been made under this loan. As of March 31, 2016, the outstanding principal amount owed to the World Bank, the IDB and Fondo Financiero para el Desarrollo de la Cuenca del Plata (FONPLATA) totaled ARS 10.86 billion. Bilateral Lending and Credit Facilities Member states of the Organization for Economic Co-operation and Development (the “OECD”) have extended loans or credit facilities to the Province for various purposes. These loans or facilities include: • bilateral loans from the governments of Italy and Spain; • credit facilities provided by Credit Lyonnais and guaranteed by COFACE, the French export-import insurance agency; and • financing extended by the Export-Import Bank of Japan and the Japan Bank for International Cooperation, both of which are agencies of the government of Japan. Each of these loans and credit facilities has been extended to the Province to finance equipment imports necessary for essential public services. The federal government guarantees the Province’s payment obligations under these loans and credit facilities. Any payments made by the federal government pursuant to this guarantee are secured by federal tax co-participation revenues owed to the Province. The Province is in default on these loans and credit facilities and has authorized the federal government to conduct negotiations on its behalf to restructure these loans and credit facilities. As of March 31, 2016, the outstanding principal amount owed under these loans or credit facilities totaled ARS 2.00 billion. Bond of the Province of Buenos Aires due 2016 In May 2009, the Province issued U.S. dollar-denominated bonds in the aggregate amount of USD 35 million. USD 28.9 million of these bonds was subscribed by the Social Security Funds of the Province. The unsubscribed bonds are currently held by the Province. In December 2009, the original issue amount was increased by USD 165 million and such amount remains unsubscribed. The bonds were issued on May 1, 2009, mature on May 1, 2016 and amortize in nine semi-annual installments beginning on May 1, 2012. The bonds bear interest at U.S. dollar BADLAR plus 1.5%, with an interest rate cap of 7.0%. Interest was capitalized until November 1, 2009 and the first interest payment was made on May 1, 2010. All payments are secured by federal tax co-participable funds that the Province is entitled to receive. As of March 31, 2016 the aggregate outstanding principal amount owed under these bonds was equal to ARS 48.07 million. Public Debt Issuance Program in the local capital markets for 2012 In 2012, pursuant to Provincial Decree No. 292/12, the Province created the Programa de Emisión de Deuda Pública en el Mercado Local de Capitales durante el Ejercicio 2012 (Public Debt Issuance Program in the Local Capital Markets for 2012) to issue bonds for up to USD 250 million. Principal and interest on these bonds are payable in pesos at the exchange rate in effect as of each payment date. Banco Provincia was retained to act as Lead Manager and Puente Hnos. Sociedad de Bolsa S.A. as Bookrunner. On May 24, 2012, pursuant to Resolution No. 181/12, the Province issued the first bond under this program for a nominal value of USD 50.2 million. The bond, which was paid on May 24, 2013, accrued interest at an annual fixed rate of 9.25%. On August 8, 2012, pursuant to Resolution No. 245/12, a second bond was issued for a nominal value of USD 192.5 million. On November 7, 2012, the Province reopened the issuance of this second bond through a private 90 placement for the remaining nominal value under the program of USD 7.3 million. This second bond, which was repaid in full on August 8, 2013, accrued interest at an annual fixed rate of 9.00%. Public Debt Issuance Program in the local capital markets for 2013 In 2013, pursuant to Provincial Decree No. 164/13, the Province created the Programa de Emisión de Deuda Pública en el Mercado Local de Capitales durante el Ejercicio 2013 (Public Debt Issuance Program in the local capital markets for 2013) to issue bonds for up to USD 800 million. Principal and interest on these bonds are payable in pesos at the exchange rate in effect as of each payment date. As in 2012, Banco Provincia was retained to act as Lead Manager and Puente Hnos. Sociedad de Bolsa S.A. as Bookrunner. On August 8, 2013, pursuant to Resolution No. 99/13, the Province issued a bond for a nominal value of USD 200 million. The bond, accrued interest at an annual fixed rate of 4.24% and was repaid in full on February 8, 2015. Authorizations under the Fiscal Responsibility Law Under the Fiscal Responsibility Law established in 2004 and adopted by the Province in 2005, all of the provincial governments are required to obtain the authorization from the federal government before incurring any indebtedness. See “Public Sector Finances—Overview of Provincial Accounts—Fiscal Responsibility Law.” Since the regime has come into effect, the Province has applied several times to obtain the federal government’s authorization for incurring new indebtedness, including with respect to the Notes, or modifying the financial terms of the Province indebtedness. As of the date of this offering memorandum, the Province has obtained a favorable response to 71 of its requests. 91 BANCO PROVINCIA Overview Banco de la Provincia de Buenos Aires (“Banco Provincia”) is a self-administered public institution, whose origin, guaranties and privileges are set forth in the Preamble and in Sections 31 and 104, ratified by Sections 31 and 121 of the National Constitution as amended in 1994, in the National Law No. 1029 of 1880, and in the relevant provincial laws. Banco Provincia is the second largest bank in Argentina in terms of total deposits and assets, with deposits of ARS 146.2 billion, and total assets of ARS 162.8 billion at March 31, 2016. At December 31, 2015 Banco Provincia had deposits of ARS 122.0 billion representing 9.0% of the total deposit in cash of Argentina and total assets of ARS 138.4 billion. The Province is the sole owner of Banco Provincia. Banco Provincia is an entidad autárquica (self-administered public institution) governed by a board of directors appointed by the Governor of the Province with the approval of the provincial Senate. Banco Provincia acts as the financial agent of the Province and collects provincial taxes and duties on the Province’s behalf. Banco Provincia is also the exclusive paying agent of the Province, handling payments of civil servants’ wages and salaries and pension and retirement benefits, as well as payments to the Province’s creditors. In addition, Banco Provincia is the exclusive agent for judicial deposits related to non-federal cases in provincial courts. In accordance with Banco Provincia’s charter approved by Provincial Decree-Law No. 9,434/79, the Province guarantees all deposits, bonds, securities and other liabilities of Banco Provincia. However, since the specific nature, scope and procedural aspects of the Province’s obligations under the guarantee are not expressly defined under the provincial decree-law, the Province believes that the guarantee is an indirect and subsidiary obligation of the Province under general provincial legal principles. As a result, creditors of Banco Provincia seeking to enforce the guarantee must exhaust all legal remedies against Banco Provincia before requesting payment from the Province under the guarantee. Banco Provincia is one of the largest providers of general, commercial and retail banking services in Argentina, with corporate offices in the cities of La Plata and Buenos Aires and a local retail network of 346 branch offices located throughout the provincial territory and in the City of Buenos Aires. Banco Provincia also offers trade finance and international products through its network of foreign offices in Brazil, Uruguay, Panama and Spain, and, until the winding-down process is completed, the Cayman Islands, in cooperation with approximately 150 correspondent banks around the world. At March 31, 2016, Banco Provincia had 10,526 employees. Banco Provincia’s activities are mainly focused on individuals and small and mid-sized enterprises, but it also offers a wide variety of products to large companies in the agricultural, industrial, commercial and services sectors. It offers traditional credit services to businesses, including foreign trade, project and commercial financing, as well as consumer and mortgage loans and a broad range of other products and services to individuals, including credit and debit cards and ATM and other cash dispenser facilities. Through Grupo Bapro S.A. and its subsidiaries, Banco Provincia also offers a range of other financial and investment products and services, such as insurance, leasing, securities investments and mutual funds. Regulatory Framework Banco Provincia is exempt from compliance with Argentine financial and banking regulations under an agreement entered into by the Province and the federal government in 1859. However, Banco Provincia voluntarily adheres to the regulatory framework of the Argentine financial sector and therefore complies with the banking regulations and rules adopted by the Central Bank, including regulations and rules relating to minimum capital, solvency and liquidity requirements and the supervisory powers of the Central Bank. Because of its special status as a provincial self-administered public institution, Banco Provincia is not subject to any federal income or other tax liability. Law No. 24,485, as amended by Law No. 25,089 and Decree No. 540/95, enacted on April 12, 1995, created the Sistema de Seguro de Depósitos (Bank Deposit Insurance System, or “SSGD”), which is overseen by the Central 92 Bank. The SSGD was implemented by the Fondo de Garantía para los Depósitos (Deposit Insurance Fund, or “FGD”) and is managed by the private company Seguros de Depósitos S.A. (Deposit Insurance Company, or “SEDESA”). The shareholders of SEDESA are the federal government (through the Central Bank) and a trust established by the financial institutions that participate in the system. These entities are required to pay monthly contributions to FGD as determined pursuant to Central Bank rules. The SSGD is financed through regular and supplemental contributions by the participating financial institutions. The SSGD covers all peso and foreign currency deposits held in accounts with the participating financial institutions, including demand deposit accounts, savings accounts and time deposits, limited to ARS 450,000 per depositor, and subject to various other limitations and exceptions. Banco Provincia has been a voluntary participant in the SSGD since 1997. The capital ratio for Banco Provincia at March 31, 2016 was 7.51%. The capital ratio represents the quotient of regulatory capital over risk-weighted assets, determined in accordance with the regulations of the Central Bank. Banco Provincia has submitted a new plan, currently under consideration by the Central Bank, oriented to remedy the deficiency in its capitalization ratio by December 31, 2018. Beginning in October 2014, the Central Bank established a minimum rate paid by the banks on fixed-term deposits made by retail clients. This regulation applies to Banco Provincia, which has a significant amount of retail clients. As a result of such regulation, together with an increase in the cost of deposits’ insurance (from 0.015% to 0.060%), Banco Provincia’s funding costs increased considerably. Furthermore, during 2015, the Central Bank strengthen its regulation of credits to productive investment by mandating below market rates and requiring the funding of such credits to come from the lending entity only, while offering no offsetting compensation to the lender. This regulation had a negative impact on Banco Provincia’s financial brokerage activities in 2015, mainly due to the increase in interests paid by Banco Provincia under fixed term loans and increased administrative expenses, which were partially offset by a slight increase in loan interest charged to Banco Provincia’s clients. As of the date of this offering memorandum, the Central Bank’s new authorities, who took office in December 2015 as a result of the Macri administration taking office, eliminated the regulations relating to minimum rate paid by the banks on fixed-term deposits made by retail clients and maximum interest rates applied over certain credit lines. The new administration also reduced the cost of deposit insurance from 0.060% to 0.015%. The combined effects of the Central Bank’s measures resulted in an increase in Banco Provincia’s financial intermediation margin from ARS 2.0 billion in March 31, 2015 to ARS 3.1 billion in March 31, 2016. 93 Selected Financial Information The following selected financial information has been derived from Banco Provincia’s audited financial statements for the periods indicated below. At and for the year ended December 31, 2012 2013 2014 (in millions of pesos) 2011 Balance sheet Data Assets Cash and due from banks ...................................... Government and corporate securities .................... Net loans ............................................................... Other receivables from financial Brokerage activities ................................................................ Property, equipment and miscellaneous assets ...... Other assets (1) ....................................................... Total assets ............................................................... ARS Liabilities Deposits ................................................................ Liabilities from financial brokerage activities(1) .... Miscellaneous liabilities ........................................ Provisions ............................................................. Items for which classification is pending ............... Total Liabilities ........................................................ Total Net Equity ....................................................... Total Net Equity and Liabilities ......................... ARS Income Statement Data Financial Income ................................................... ARS Financial Expenditure ........................................... Provision for loan losses ....................................... Net income from services ...................................... Monetary gain (loss) on financial Brokerage activities ................................................................ Administrative Expenses ....................................... Monetary gain (loss) on administrative expenses ................................................................ Net income (loss) on financial Brokerage activities ................................................................ Net miscellaneous income ..................................... Monetary gain (loss) on other operations .............. Net income (loss)....................................................... ARS (1) Source: At and for the three-month period ended March 31 2015 2016 2015 7,923 9,987 21,426 10,205 11,115 29,252 13,289 11,735 42,833 2,755 756 1,986 44,833 ARS 2,117 824 2,581 56,094 ARS 6,020 8,993 871 1,008 3,000 4,585 77,748 ARS107,330 38,393 3,188 160 308 19 42,068 2,765 49,405 2,393 240 607 26 52,671 3,423 68,690 2,378 355 1,428 24 72,875 4,873 44,833 ARS 56,094 ARS 90,985 6,985 496 942 31 99,439 7,891 ARS107,33 77,748 0 4,481 (1,849) (201) 1,404 6,524 (2,926) (340) 1,840 10,397 (4,656) (400) 2,419 17,256 (8,739) (678) 2,996 20,966 (12,404) (712) 4,225 4,550 (2,563) (151) 843 7,652 (4,544) (239) 1,065 – (3,244) – (4,358) – (5,610) – (7,748) – (10,844) – (2,198) – (3,360) – – – – – – 591 9 – 600 ARS 740 (80) – 660 ARS 14,557 19,009 59,178 19,920 17,122 85,626 10,320 1,347 4,065 ARS 138,400 ARS 122,046 5,624 915 686 26 129,296 9,104 ARS – 2150 3,087 (707) (45) – – 1,443 ARS 3,042 ARS 138,400 ARS 1,231 (4) – 1,229 ARS 16,896 19,329 60,968 29,960 30,804 85,243 5,743 1,129 5283 109,348 ARS 10,479 1,423 4,854 162,763 96,620 2,707 520 1,046 35 100,929 8,420 146,188 4,574 1,308 729 28 152,827 9,936 109,348 ARS 162,764 481 47 – 528 ARS Includes intangible assets, investments in other entities, various other loans and asset items for which classification is pending. Banco Provincia. Consolidated Assets Public Sector Exposure As of March 31, 2016, Banco Provincia had a public sector exposure in Argentina of approximately ARS 25.43 billion, which represented 15.6% of its assets. This significant public sector exposure was primarily a result of the debt restructuring by the federal government and compensation for the effects of the devaluation of the peso and asymmetric pesification (see “Bogar and Boden”) and the assistance to the provincial Government in accordance with Banco Provincia’s charter. 94 574 259 – 832 The following table shows the total exposure of Banco Provincia to the Argentine public sector, both national and provincial, at the dates indicated: Public Sector Exposure of Banco Provincia 2011 Government Securities Bogar 2018 ............................................................................. Boden 2015 ............................................................................. Argentina Dollar-denominated Discount Bonds ..................... Bono Banco Municipal de La Plata......................................... Provincia de Buenos Aires Bonds ........................................... Bonar Pesos 2016 ................................................................... Bonar Pesos 2017 ................................................................... Bonar Pesos 2019 ................................................................... Bonad Dollar Linked 2016...................................................... Bonar Dollar 2017 .................................................................. Bonar Dollar 2024 .................................................................. Bonac Julio 2016 .................................................................... Others ..................................................................................... Total Government Securities ............................................... Public Sector Loans................................................................... At and for the year ended December 31 2012 2013 2014 2015 8,101 5 4 734 668 9,512 2,173 9,050 8 7 1 821 584 10,471 2,963 Other receivables from financial brokerage activities ............ At and for the three-month period ended March31 2015 2016 8,653 1,561 12 460 491 11,177 5,204 8,572 278 186 93 210 106 203 79 9,727 8,706 6,648 227 1 97 27 19 98 7,116 11,163 8,145 291 194 90 232 111 223 90 9,376 7,514 6,470 219 3,786 3,786 7,464 3,786 7,464 97 82 18 69 6,956 7,282 Others Assets Bogar 2018 (1).......................................................................... 29 - 271 - - - - Bogar 2018 (1).......................................................................... 729 - - - - - - Boden 2012 (2) ......................................................................... 237 - - - - - - Discount USD (2) ..................................................................... 149 - - - - - - Bogar 2018 (2).......................................................................... 403 224 - - - - - Global 2017 (2) ........................................................................ - 354 - - - - - Boden 2015 (2) ......................................................................... Titulos Vinculados al PBI en USD ......................................... Caja de Jubilaciones BPBA .................................................... Total Others Assets ................................................................... Total ........................................................................................... 7 1,554 13,239 223 46 646 1,493 14,927 1,606 1,877 22,044 3,773 3,773 25,992 3,408 3,408 29,152 4,321 4,321 24,997 3,733 3,733 25,434 (1) (2) Source: Bonds applied in repurchase transactions (“Repos”) with local banks. Bonds applied in repurchase transactions (“Repos”) with foreign banks. Banco Provincia. Bogar and Boden In February 2002, the federal government ordered the mandatory conversion of dollar-denominated deposits to CER-adjusted pesos deposits at a rate of ARS 1.40 per USD 1.00. This measure was known as the “pesification.” As a result of the pesification of deposits and loans at different rates (known as “asymmetric pesification”), Argentine banks, including Banco Provincia, recorded losses reflecting the difference between their pesified assets and their pesified liabilities. To compensate banks for these losses, the federal government issued to these banks a new type of financial instrument, known as the Boden Compensation (“Boden 2007”). In addition, in May 2002, the federal government issued a new type of bond, known as the Boden Coverage (“Boden 2012”), to compensate banks for losses incurred, based on their balance sheets at December 31, 2001, reflecting any amounts by which their remaining foreign-currency denominated liabilities not subject to pesification exceeded their remaining foreign-currency denominated assets not subject to pesification. 95 In 2004, pursuant a request by the federal Ministry of Economy and Public Finance under the terms of Decree No. 905/02, Banco Provincia delivered Guaranteed Bonds (“Bogar 2018”) in exchange for Boden 2012, and agreed to exchange any Boden 2007 it received for such Bogar 2018. On July 31, 2006, Banco Provincia confirmed to the Central Bank that it agreed with the quantities of Boden 2007 and Boden 2012 owed to Banco Provincia pursuant to Articles 28 and 29 of Decree No. 905/02 as determined by the Superintendencia de Entidades Financieras y Cambiarias (the Superintendence of Financial Institutions and Exchanges or “SEFyC”). On October 3, 2006, as a result of its confirmation to the SEFyC regarding the quantities of Boden 2007, Banco Provincia agreed with the federal Ministry of Economy and Public Finance to execute the exchange of Boden 2007 for Bogar 2018. On October 13, 2006, the federal Ministry of Economy and Public Finance delivered to Banco Provincia Bogar 2018 with a face value of ARS 136.0 million. Bogar 2018 are recorded at their technical value in Banco Provincia’s financial statements, which is calculated as the outstanding principal amount of the bond plus accrued interest. In September 2004, the Province established the Fondo de Sostén del Valor de los Bonos Garantizados (Bogar) (Fund to Support the Value of the Guaranteed Bonds (Bogar), or the “Fund”) to assure that the present value of the Bogar, discounted at the rates established by the Central Bank, would be equal to its technical value. The Fund receives cash flows financed with the revenues of the Province and transferred to Banco Provincia as capital. In accordance with provincial Law No. 13,225, modified by provincial Law No. 13,238, the Province had to transfer to the Fund ARS 0.05 billion in 2004, ARS 0.17 billion in 2007, ARS 0.16 billion in 2008, ARS 0.14 billion in each of 2009 and 2010, and has to transfer ARS 0.14 billion per year from 2011 through 2015 and ARS 0.12 billion in 2016. In addition, Banco Provincia has to transfer to the Province a portion of its net income in an amount equal to the cash flows provided by the Fund. Bogar 2018 represented 3.97% of Banco Provincia’s assets at March 31, 2016. Loan Portfolio The following table shows Banco Provincia’s loan portfolio by type of client at and for the periods indicated: Evolution of Loans of Banco Provincia 2011 Public(1) ...................................... 2,173 Financial 4 19,831 Private ........................................ Total .......................................... 22,008 (582) Allowances ................................. ARS 21,426 Total Net Loans ........................ At and for the year ended December 31, 2012 2013 2014 (in millions of pesos) 2,963 5,204 8,706 4 27,146 38,736 52,062 30,113 43,940 60,768 (862) (1,107) (1,590) ARS 29,252 ARS 42,833 ARS 59,178 2015 11,163 7 76,232 87,402 (1,776) ARS 85,626 At and for the three-month period ended March 31, 2015 2016 7,514 4 55,107 62,624 (1,656) ARS 60,968 7,282 79,890 87,172 (1,929) ARS 85,243 Source: Banco Provincia. At December 31, 2011, the total loan portfolio grew by 74.5% as compared to the level attained at December 31, 2010, mainly due to a 176.8% increase in loans to the public sector and a 64.6% increase in loans to the private sector. At December 31, 2012, the portfolio of total loans increased by 36.5% as compared to 2011, mainly as a result of a 36.9% growth in private sector loans. At December 31, 2013, total lending amounted to ARS 42.83 billion, which represented a 46.4% increase as compared to December 31, 2012, mainly due to a 42.7% increase in private loans and a 75.6% increase in public sector loans. At December 31, 2014, total lending amounts to ARS 59.18 which represented a 38.2% increase as compared to December 31, 2013, mainly due to a 34.4% increase in private sector loans and a 67.2% increase in public sector loans. This increase in private sector loans outperformed the increase of the rest of the banking system (which grew by 96 20.0%), and was mainly driven by an increase of approximately 40.0% of loans to companies, and to a lesser extent, loans to individuals, which increased by 23.0%. At December 31, 2015, the portfolio of total loans increased by 44.7% as compared to 2014, mainly as a result of a 46.4% growth in private sector loans. At March 31, 2016, loans increased to ARS 85.24 billion, which represented a 39.8% increase as compared to March 31, 2015, mainly due to a 45.0% increase in private sector loans. Loan Loss Rates The following table shows the loan loss rates for loans in Banco Provincia’s portfolio for the periods indicated: 2011 Loan Loss rates...................... Source: 1.3% As of December 31, 2012 2013 2014 2015 (in percentages) 1.8% 1.9% 1.9% 1.6% As of March 1, 2015 2016 2.1% 1.9% Banco Provincia. During the period 2011-2015, loan loss rates increased 23.1%. As of March 31, 2016, we registered a 1.9% loan loss rate, which is in line with loan loss rates seen in recent years, and also in line with the 1.8% loan loss rate of the financial system as of that date. Sources of Funds Banco Provincia’s main funding source has been deposits, particularly from the private sector. At March 31, 2016, deposits represented 95.7% of its total liabilities. Deposits The table below shows the evolution, by sector, of Banco Provincia’s total deposits at and for the periods indicated: Evolution of Deposits of Banco Provincia At and for the year ended December 31, At and for the three-month period ended March 31, 2011 2012 2013 2014 2015 2015 2016 (in millions of pesos) 8,975 10,189 17,970 23,481 21,314 23,266 44,952 117 190 123 193 217 160 142 29,301 39,026 50,597 67,311 100,514 73,195 101,093 5,812 7,531 8,844 11,616 14,402 12,231 14,893 9,434 12,084 15,092 20,478 29,813 20,250 30,258 13,070 18,082 24,892 32,954 53,024 38,061 52,921 846 1,110 1,396 1,650 2,288 1,952 1,998 Non-Financial Public Sector........................ Financial Sector........................................... Non-Financial Private Sector ...................... Checking Accounts................................. Savings Accounts ................................... Fixed Term Deposits .............................. Others .................................................... Accrued Interest, adjustments and 139 quotation differences payable (3) ............. Total ...................................................... ARS 38,394 (1) Source: 219 ARS 49,405 373 ARS 68,690 613 ARS 90,985 987 ARS122,046 701 ARS 96,620 1,023 ARS146,188 Non-interest bearing accounts. Banco Provincia. At December 31, 2011, deposits grew by 17.7% as compared to the previous year, amounting to ARS 38.39 billion. This increase was mainly due to an increase of ARS 6.67 billion in non-financial private sector deposits. 97 At December 31, 2012, deposits totaled ARS 49.41 billion, which represented a 28.7% increase as compared to 2011. This increase was mainly due to rises in deposits from the non-financial private sector (33.2%) and the nonfinancial public sector (13.5%). At December 31, 2013, deposits totaled ARS 68.69 billion, which represented an increase of 39% as compared to 2012. This increase was mainly due to a 76.4% increase in non-financial public sector deposits and a 29.6% increase in private sector deposits. In 2014, Banco Provincia’s total deposits increased at higher rates than those of the broader Argentine banking system, mainly due to an aggressive strategy to increase deposits in the non-financial private sector, except with respect to dollar deposits which registered a lower growth. At December 2014, deposits totaled ARS 90.99 billion, which represented an increase of 32.5% as compared to 2013. This increase was mainly due to a 31.0% increase in nonfinancial public sector deposits and a 33.0% increase in private sector deposits driven by the savings bank accounts, fixed-term deposits and current accounts. At December 31, 2015, deposits totaled ARS 122.04 billion, which represented an increase of 34.1% as compared to 2014. This increase was mainly due to a 49.3% increase in non-financial private sector deposits. At March 31, 2016, deposits amounted to ARS 146.18 billion, which represented an increase of 51.3% as compared to March 31, 2015. This increase was mainly due to a 93.2% increase in non-financial public sector and 38.2% increase in non-financial private sector deposits. Judicial Decisions (Amparos) As Argentina’s economic crisis deepened and speculation of a potential devaluation mounted in 2001, confidence in the banking sector began to erode, triggering a significant run on deposits during that year. By December 31, 2001, Banco Provincia’s total deposits (peso and foreign currency) had declined 35.8% from December 31, 2000 levels. To reduce the threat of a collapse of the banking sector, in December 2001 and February 2002 the federal government imposed strict limits on bank withdrawals. As the demand for pesos recovered in the fall of 2002, easing the pressure of capital flight from the Argentine economy and its banking system, the federal government was able to lift all restrictions on withdrawals of demand deposits in November 2002. Similarly, in April 2003, depositors were permitted to withdraw their term deposits. As a result of Decree No. 739/2003, restrictions on withdrawals are no longer in effect. The decree allowed depositors to withdraw their deposits at a rate of ARS 1.4 per USD 1.00, adjusted for CER, and to be compensated for the difference between that rate and the then current exchange rate by receiving bonds denominated in U.S. dollars (Boden 2013 or Boden 2006). However, some depositors chose not to withdraw their deposits in order to preserve the original value of the account in its original currency in hopes of pursuing a lawsuit against the federal government and the financial institutions. At March 31, 2016, Banco Provincia had refunded ARS 2.7 billion to depositors seeking the original value of their deposits from their financial institutions pursuant to judicial orders finding that the restrictions on bank withdrawals were unconstitutional. Since Banco Provincia was required to return these deposits using currency exchange rates in effect on the date of refund, in accordance with Central Bank rules, Banco Provincia recorded in aggregate ARS 1.04 billion as “Intangible assets” for the difference between the refund amounts stated in the judicial orders and the deposit balance booked at the conversion rate of USD 1 to ARS 1.40, adjusted for CER. This amount is amortized over a 60-month period and, at March 31, 2016, the outstanding balance of these intangible assets amounted to ARS 51.6 million. As of March 31, 2016, Banco Provincia recorded a provision of ARS 33.9 million for judicial deposits, reflecting the difference between the book value of the deposits considered in their original currency and the current peso value of those deposits. Financing from the Central Bank During the 2001 economic crisis, the Central Bank used its power to provide temporary financial assistance to Argentine financial institutions to address the liquidity shortages of these institutions resulting from the run and subsequent freeze on deposits and the asymmetric pesification of financial assets and liabilities. Banco Provincia is required to repay the amount of any temporary financial assistance from the Central Bank received on or before March 98 28, 2003 in 70 monthly installments in CER-adjusted pesos. This amount was initially ARS 4.4 billion. The principal amount, which is adjusted by the CER index, accrues interest at a yearly rate of 3.5% and is secured by an aggregate amount of guaranteed loans received under the federal debt exchange program and Bogar equal to 125.0% of the outstanding amount. The Central Bank is entitled to extend this repayment schedule to up to 120 months with the consent of a new committee appointed by the federal government in 2003 to oversee the complete restructuring of the financial system. The repayment schedule, however, cannot exceed the average useful life of the assets securing repayment. In June 2003, Banco Provincia requested an extension of the repayment schedule of its temporary financial assistance obligations to 120 months. As of the date of this offering memorandum, no extension has been approved and, as a result, since March 2004, Banco Provincia has been making installment payments of principal and interest on its temporary financial assistance obligations in accordance with the initial 70-month schedule. On June 2, 2007, Banco Provincia made an extraordinary payment of ARS 800 million to prepay the temporary financial assistance. The Central Bank allocated the entire amount to principal under the CER-adjusted debt. On July 3, 2007, Banco Provincia made another advance payment of ARS 800 million. The Central Bank allocated ARS 724 million of this amount to principal and ARS 76 million to interest under the CER-adjusted debt. At December 31, 2008, the outstanding principal amount under this program was ARS 852 million. On December 31, 2009, Banco Provincia paid the last installment and completely cancelled its debt with the Central Bank under the temporary financial assistance program. External Indebtedness The table below shows, by source, the amounts of foreign currency financing provided by financial institutions outside of Argentina to Banco Provincia for the periods specified below. Foreign Currency Financing Provided to Banco Provincia 2011 Overnight and short-term funds ...................................... Certificates of deposit (short-term)................................. Trade finance (short-term).............................................. Interbank lines (medium-term) ....................................... Secured financing (short-term) ...................................... Secured financing (medium-term) ................................. Floating rate interest bonds (long-term) ......................... U.S. Commercial Paper .................................................. Medium-Term Financing ............................................... Total .............................................................................. Source: 17 131 39 187 At December 31, 2013 2014 (in millions of USD) 13 9 13 135 9 3 24 8 172 26 16 2012 2015 28 28 At March 31, 2015 2016 25 3 28 30 30 Banco Provincia. Banco Provincia’s external indebtedness decreased by approximately 84.0% between December 2011 and March 2016. This indebtedness fell around 38.5% from 2013 to 2014 mainly due to the amortization payment under the Debt Restructuring Agreement entered into with Commodity Credit Corporation. Other Liabilities Litigation. At March 31, 2016, the most significant legal actions pending against Banco Provincia amount to almost ARS 509 million; this figure includes an estimate of ARS 55 million on account of legal costs. The class action lawsuit filed by Union de Usuarios (Users Union) related to charges for ATM robbery insurance, is currently in the execution stage. As of March 31, 2016, according to internal estimates of Banco Provincia, an aggregate amount of ARS 99 29 million has already been credited to affected customers holding accounts with Banco Provincia, while ARS 30 million is still pending to be credited to certain other former customers. Liquidity and Financial Position The table below shows Banco Provincia’s liquidity ratios for the periods specified below: Liquidity Ratios At and for the year ended December 31, 2012 2013 2014 2015 (In percentages) 20.6% 20.7% 19.4% 16.0% 16.3% 47.8% 52.2% 55.1% 55.1% 61.9% 2011 Cash and cash equivalents/Deposits ................................ Net Loans/Assets ............................................................. At and for the threemonth period ended March 31, 2015 2016 17.4% 55.8% 20.5% 52.4% Source: Banco Provincia. The table below shows Banco Provincia’s solvency ratios for the periods specified below: Solvency Ratios At and for the year ended December 31, 2012 2013 2014 (in percentages) 6,2% 6.1% 6.3% 7.4% 12,9% 11.7% 11.4% 13.3% 2011 Net Equity/Assets ............................................................. Net Equity/Loans ............................................................. Source: 2015 6.6% 10.6% At and for the threemonth period ended March 31, 2015 2016 7.7% 13.8% 6.1% 11.7% Derived from the audited financial statements of Banco Provincia. Net Income Banco Provincia recorded net income of ARS 539 million in 2010, ARS 600 million in 2011, ARS 660 million in 2012, ARS 1,443 million in 2013, ARS 3,042 million in 2014, ARS 1,228 million in 2015 and ARS 832 million as of March 31, 2016. Branches Abroad On February 14, 2007, by Resolution No. 203/07, Banco Provincia’s board of directors decided to close the bank’s New York Agency. As of December 2009, after several months of winding down operations, the New York Agency closed. On March 19, 2009, by Resolution No. 324/09, Banco Provincia’s board of directors decided to close the bank’s Grand Cayman branch and sent the pertinent communication to the Grand Cayman Island Regulatory Authority. The Grand Cayman branch is currently winding down operations. 100 DESCRIPTION OF THE NOTES This section of this offering memorandum is only an overview of the material provisions of the Notes and the Indenture. The Province urges you to read the Indenture for a complete description of the Province’s obligations and your rights as a holder of the Notes. Copies of the Indenture are available free of charge at the offices of the trustee and the Luxembourg listing agent. The Notes will be issued pursuant to the trust indenture between the Province and U.S. Bank National Association as trustee dated as of June 9, 2015 (the “Indenture”). General Terms of the Notes Basic Terms of the 2019 Notes The Notes will: • be direct, general, unconditional and unsubordinated obligations of the Province; • be initially issued in an aggregate principal amount of USD 500,000,000; • pay principal on June 15, 2019; • mature on June 15, 2019; • not be redeemable before maturity at the option of the Province or repayable at the option of the holder and not be entitled to the benefit of any sinking fund. The Province may at any time, however, purchase Notes and hold or resell them or surrender them to the trustee for cancellation; • be represented by one or more registered notes in global form (see “Registration and Book-Entry System”); • be eligible for settlement in Euroclear and Clearstream; • be issued in denominations of USD 150,000 and in integral multiples of USD 1,000 in excess thereof; and • represent a claim to the full principal due on each amortizing date (plus any accrued and unpaid interest due at such time) or upon earlier acceleration in accordance with their terms. Interest on the 2019 Notes will: • accrue at the rate of 5.750% per annum; • accrue from June 15, 2016 or the most recent interest payment date; • be payable semi-annually in arrears on June 15 and December 15 of each year, beginning on December 15, 2016, to persons in whose names the Notes are registered at the close of business on the business day preceding the corresponding payment date; and • be computed on the basis of a 360-day year comprised of twelve 30-day months. Basic Terms of the 2027 Notes The Notes will: • be direct, general, unconditional and unsubordinated obligations of the Province; • be initially issued in an aggregate principal amount of USD 500,000,000; 101 • pay principal in three installments: 33.33% on June 15, 2025, 33.33% on June 15, 2026 and 33.34% on June 15, 2027; • mature on June 15, 2027; • not be redeemable before maturity at the option of the Province or repayable at the option of the holder and not be entitled to the benefit of any sinking fund. The Province may at any time, however, purchase Notes and hold or resell them or surrender them to the trustee for cancellation; • be represented by one or more registered notes in global form (see “Registration and Book-Entry System”); • be eligible for settlement in Euroclear and Clearstream; • be issued in denominations of USD 150,000 and in integral multiples of USD 1,000 in excess thereof; and • represent a claim to the full principal due on each amortizing date (plus any accrued and unpaid interest due at such time) or upon earlier acceleration in accordance with their terms. Interest on the 2027 Notes will: • accrue at the rate of 7.875% per annum; • accrue from June 15, 2016 or the most recent interest payment date; • be payable semi-annually in arrears on June 15 and December 15 of each year, beginning on December 15, 2016, to persons in whose names the Notes are registered at the close of business on the business day preceding the corresponding payment date; and • be computed on the basis of a 360-day year comprised of twelve 30-day months. Status The Notes will be direct, general, unconditional and unsubordinated Public External Indebtedness of the Province. The Notes rank and will rank without any preference among themselves and equally with all other unsubordinated Public External Indebtedness of the Province. It is understood that this provision shall not be construed so as to require the Province to make payments under the Notes ratably with payments being made under any other Public External Indebtedness of the Province. For purposes of the preceding paragraph, (A) “Public External Indebtedness” means any External Indebtedness of, or guaranteed by, the Province which (i) is publicly offered or privately placed in securities markets, (ii) is in the form of, or represented by, bonds, notes or other securities or any guarantees thereof and (iii) is, or was intended at the time of issue to be, quoted, listed or traded on any stock exchange, automated trading system or over-the-counter securities market (including securities eligible for sale pursuant to Rule 144A under the Securities Act, as amended (or any successor law or regulation of similar effect)), and (B) “External Indebtedness” means obligations for borrowed money or evidenced by securities, debentures, notes or other similar instruments denominated and payable, or which at the option of the holder thereof may be payable, in a currency other than the lawful currency of Argentina, regardless of whether that obligation is incurred or entered into within or outside Argentina. Payment of Principal and Interest The trustee will make payments to the registered holders of the Notes. While the Notes are held in global form, holders of beneficial interests in the Notes will be paid in accordance with the procedures of the relevant clearing system and its direct participants, if applicable. Neither the Province nor the 102 trustee shall have any responsibility or liability for any aspect of the records of, or payments made by, the relevant clearing system or its nominee or direct participants, or any failure on the part of the relevant clearing system or its direct participants in making payments to holders of the Notes from the funds they receive. If any date for payments of interest, principal or other amounts contemplated herein is not a business day, the Province will make the payment on the next business day. Such payments will be deemed to have been made on the due date, and no interest on the Notes will accrue as a result of the delay in payment. As used herein, “business day” means any day that is not a Saturday or Sunday, and that is not a day on which banking or trust institutions are authorized generally or obligated by law, regulation or executive order to close in New York City or in the City of Buenos Aires (or in the city where the relevant paying or transfer agent is located). If any money that the Province pays to the trustee or any paying agent to make payments on any Notes is not claimed at the end of two years after the applicable payment was due and payable, then the money will be repaid to the Province on the Province’s written request. The Province will hold such unclaimed money in trust for the relevant holders of those Notes. After any such repayment, neither the trustee nor any paying agent will be liable for the payment. However, the Province’s obligations to make payments on the Notes as they become due will not be affected until the expiration of the prescription period specified in the Notes. To the extent permitted by law, claims against the Province for the payment of principal of, premium, if any, or interest or other amounts due on, the Notes (including Additional Amounts) will become void unless made within four years of the date on which that payment first became due. Registration and Book-Entry System The Notes will be initially issued and held in certificated form. The certificated notes will be subsequently transferred to a global security, in fully registered form, without interest coupons attached, to, and registered in the name of, a nominee of a common depositary of Euroclear and Clearstream, Luxembourg. Financial institutions, acting as direct and indirect participants in either Euroclear or Clearstream, Luxembourg, will represent your beneficial interests in the global security. These financial institutions will record the ownership and transfer of your beneficial interests through book-entry accounts, eliminating the need for physical movement of securities. If you wish to hold securities through the Euroclear or the Clearstream, Luxembourg system, you must either be a direct participant in Euroclear or Clearstream, Luxembourg or hold securities through a direct participant in Euroclear or Clearstream, Luxembourg. Direct participants include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations that have accounts with Euroclear or Clearstream, Luxembourg. Indirect participants are securities brokers and dealers, banks, trust companies and trustees that do not have an account with Euroclear or Clearstream, Luxembourg, but that clear through or maintain a custodial relationship with a direct participant. Thus, indirect participants have access to the Euroclear or Clearstream, Luxembourg system through direct participants. The laws of some jurisdictions require that certain persons take physical delivery of securities in definitive form. Such laws may impair the ability to transfer beneficial interests in these Notes to such persons. As an owner of a beneficial interest in the global securities, you will generally not be considered the holder of any Notes under the Indenture. Certificated Securities The Province will issue securities in certificated form in exchange for interests in a global security only if: • the depositary notifies the Province that it is unwilling or unable to continue as depositary, is ineligible to act as depositary or ceases to be a clearing agency registered under any applicable statute or regulation and the Province does not appoint a successor depositary or clearing agency within 90 days; • at any time the Province decides it no longer wishes to have all or part of such notes represented by global securities; or 103 • the trustee determines, upon the advice of counsel, that it is necessary to obtain possession of such notes in certificated form in connection with any proceedings to enforce the rights of holders of such notes. In connection with the exchange of interests in a global security for securities in certificated form under any of the conditions described above, such global security will be deemed to be surrendered to the trustee for cancellation, and the Province will execute, and will instruct the trustee to authenticate and deliver, to each beneficial owner identified by the relevant clearing system, in exchange for its beneficial interest in such global security, an equal aggregate principal amount of certificated securities. If the Province issues certificated securities, they will have the same terms and authorized denominations as the Notes. You will receive payment of principal, interest and premiums, if any, in respect of certificated securities at the offices of the trustee in New York City and, if applicable, at the offices of any paying agent. You may present certificated securities for transfer or exchange according to the procedures in the Indenture at the corporate trust office of the trustee in New York City and, if applicable, at the offices of any other transfer agent appointed by the Province. The Luxembourg Stock Exchange will be informed before the Province issues certificated securities in exchange for the global security held by the common depositary or its nominee. If the Province issues such certificated securities, it will publish notices in a newspaper with general circulation in Luxembourg (which the Province expects to be Luxemburger Wort), and on the website of the Luxembourg Stock Exchange at http://www.bourse.lu, announcing procedures for payments of principal, interest and premiums, if any, in respect of or transfer of certificated securities in Luxembourg. If publication in a leading newspaper in Luxembourg is not practicable, the Province will publish such notices in a leading English language daily newspaper with general circulation in Europe. The Province will consider any published notice to be given on the date of its first publication. You may be charged for any stamp duty, tax or other governmental charge that must be paid in connection with the transfer, exchange or registration of transfer of Notes and any other expenses (including the fees and expenses of the trustee) connected with the preparation and issuance of the substitute Note. The Province, the trustee and any agent appointed by Province may treat the person in whose name any Note is registered as the owner of such Note for all purposes. If any Note becomes mutilated, destroyed, stolen or lost, you can replace it by delivering the Note or evidence of its loss, theft or destruction to the trustee. The Province and the trustee may require you to provide an indemnity satisfactory to the Province and the trustee under which you agree to pay the Province, the trustee or any agent appointed by the Province for any losses they may suffer relating to the Note that was mutilated, destroyed, stolen or lost. The Province and the trustee may also require you to present other documents or proof. After you deliver these documents, if neither the Province nor the trustee has notice that a bona fide purchaser has acquired the Note that you are exchanging, the Province will execute, and the trustee will authenticate and deliver to you, a substitute note with the same terms as the Note you are exchanging. You will be required to pay all expenses and reasonable charges associated with the replacement of this certificated security. Further Issuances Under the terms of the Indenture, the Province may from time to time, without the consent of the holders of the 2019 Notes or 2027 Notes, create and issue additional notes having terms and conditions which are the same as those of the 2019 Notes or 2027 Notes (as applicable) in all respects, except for the issue date, issue price and first payment date of interest on the 2019 Notes or 2027 Notes (as applicable); provided, however, that any such additional Notes subsequently issued that are not fungible with the previously outstanding 2019 Notes or 2027 Notes (as applicable) for U.S. federal income tax purposes shall have a separate CUSIP, ISIN or other identifying number from such previously outstanding Notes. Additional 2019 Notes or 2027 Notes issued in a qualified reopening for U.S. federal income tax purposes will be consolidated with and will form a single series with the previously outstanding 2019 Notes or 2027 Notes (as applicable). Additional Amounts All payments by the Province in respect of the Notes will be made free and clear of, and without withholding or deduction for or on account of, any present or future taxes, duties, assessments or other governmental charges of whatever nature imposed, levied, collected, withheld or assessed by or within Argentina or the Province or any political 104 subdivision or taxing authority or agency therein or thereof having the power to tax (for purposes of this paragraph, a “Relevant Tax”), unless the withholding or deduction of such Relevant Tax is required by law. In that event, the Province will pay such additional amounts (“Additional Amounts”) as may be necessary to ensure that the amounts received by the holders after such withholding or deduction will equal the respective amounts of principal and interest that would have been receivable in respect of the Notes in the absence of such withholding or deduction; except that no such Additional Amounts will be payable with respect to any Note: (1) to a holder (or to a third party on behalf of a holder) where such holder is liable for such Relevant Taxes in respect of a Note by reason of his having some connection with the Province or Argentina other than the mere holding of such Note, the receipt of principal, premium or interest in respect thereof, or the enforcement of rights thereunder; or (2) presented for payment by or on behalf of a holder who would have been able to avoid the withholding or deduction by presenting the relevant Note to another paying agent in a member state of the European Union; or (3) presented for payment more than 30 days after the Relevant Date, as defined herein, except to the extent that the holder thereof would have been entitled to Additional Amounts on presenting the same for payment on the last day of such period of 30 days; or (4) to a holder of the Note (or a third party on behalf of a holder) where such holder of the Note would not be liable for or subject to such deduction or withholding by making a declaration of non-residence or other claim for exemption or reduction to the relevant tax authorities if such holder of the Note is eligible to make such declaration or other claim and, after having been requested to make such a declaration or claim, such holder of the Note fails to timely do so, provided that (x) the Province has provided the holder with at least 60 days’ prior written notice (in accordance with the terms of the Notes) of an opportunity to satisfy such a requirement or make such a declaration or claim, and (y) in no event shall such holder’s obligation to satisfy such a requirement or to make such a declaration or claim require such holder to provide any materially more onerous information, documents or other evidence than would be required to be provided had such holder been required to file IRS Forms W-8BEN, W-8BEN-E, W-8ECI, W-8EXP and/or W-8IMY. As used in the preceding paragraph, “Relevant Date” in respect of a Note means the date on which payment in respect thereof becomes due or (if the full amount of the money payable on such date has not been received by the trustee on or prior to such due date) the date on which notice is duly given to the holders that such moneys have been so received and are available for payment. All references in this offering memorandum to principal of or interest on the Notes will include any Additional Amounts payable by the Province in respect of such principal or interest. Negative Pledge Covenant The Province has agreed that it will not, for so long as any Note remains outstanding create or permit to subsist any Lien, other than a Permitted Lien, upon the whole or any part of its property or assets to secure any Indebtedness of the Province unless the Notes are secured equally and ratably with such Indebtedness. As used herein, the term “Indebtedness” means, with respect to any person, whether outstanding on the original issuance date of a series of debt securities or at any time thereafter: (i) all indebtedness of such person for borrowed money; (ii) all reimbursement obligations of such person (to the extent no longer contingent) under or in respect of letters of credit or bankers’ acceptances; (iii) all obligations of such person to repay deposits with or advances to such person; (iv) all obligations of such person (other than those specified in clauses (i) and (ii) above) evidenced by securities, debentures, notes or similar instruments; and (v) to the extent no longer contingent, all direct guarantees, endorsements, avales or similar obligations of such person in respect of, and all direct obligations of such person to purchase or otherwise acquire, or otherwise to assure a creditor against loss in respect of, indebtedness or obligations of any other person specified in clause (i), (ii), (iii) or (iv) above. 105 As used herein, the term “Lien” means any lien, pledge, mortgage, security interest, deed of trust, charge or other encumbrance on or with respect to, any currently existing or future asset or revenues of any kind under the laws of Argentina. As used herein, the term “Permitted Lien” means: (a) any Lien in existence on the date of the Indenture; (b) any Lien upon bank accounts, deposits or proceeds thereof (or arising from the existence of rights of set-off against such accounts, deposits or proceeds) securing Indebtedness of the Province incurred in connection with letters of credit issued by, or trade finance transactions with, a bank to which such Lien is granted or holding such rights, and which Indebtedness has a final maturity of not greater than 365 days from the date on which payment under such letter of credit or in connection with such trade finance transactions is due and payable; (c) any Lien upon any property to secure Indebtedness of the Province incurred specifically for the purpose of financing the acquisition of the property subject to such Lien; (d) any Lien existing on any property at the time of its acquisition to secure Indebtedness of the Province; (e) any Lien securing Indebtedness incurred for the purpose of financing all or part of the costs of the acquisition, construction or development of a project, provided that the property over which such Lien is granted consists solely of the assets and revenues of such project or the ownership interest therein; (f) any Lien securing Indebtedness incurred for the purpose of financing all or part of the cost of personal property sold or services provided to the Province; (g) any replacement, renewal or extension of any Lien permitted by clauses (a) through (f) above upon the same property theretofore subject to such Lien, including any replacement, renewal or extension of such Lien resulting from the refinancing (without increase in the principal amount) of the Indebtedness secured by such Lien; provided that the Province shall not be permitted to replace, renew or extend any Lien in respect of Indebtedness to the federal government unless the federal government remains the creditor; (h) any Lien to secure public or statutory obligations or otherwise arising by law to secure claims other than for borrowed money; (i) any Lien securing Indebtedness of the Province to the federal government encumbering the right of the Province to receive Co-Participation Payments, provided that the incurrence of such Indebtedness so secured will not cause the Co-Participation Secured Indebtedness Ratio to exceed 50.0% in the period that includes the most recent four consecutive fiscal quarters ending prior to the date of calculation; (j) any Lien to secure any indebtedness with the financial public sector of the Province; and (k) any other Liens different from those permitted by clauses (a) through (j) above, securing Indebtedness of the Province in an outstanding aggregate principal amount not exceeding at any time 10% of the Province’s annual revenues for the period that includes the most recent four consecutive fiscal quarters ending prior to the incurrence of such Lien. As used herein, the term “Co-Participation Payments” means any transfers made by the federal government to the Province pursuant to the Federal Tax Co-Participation Law, as amended or replaced from time to time and any other law, decree or regulation governing the obligation of the federal government to distribute taxes collected by it to the Argentine provinces. 106 As used herein, the term “Co-Participation Secured Indebtedness Ratio” is the percentage that is equal to (A) for the period that includes the most recent four consecutive fiscal quarters ending prior to the date of calculation, the aggregate amount of payments of principal and interest that became due in such periods (after giving pro forma effect to the incurrence of Indebtedness secured by a Lien on the Province’s right to receive Co-Participation Payments), in respect of Indebtedness that is secured by a Lien on the Province’s right to receive Co-Participation Payments, divided by (B) the aggregate amount of Co-Participation Payments actually received by the Province during such period, (C) multiplied by 100. Events of Default and Acceleration of Maturity Each of the following is an event of default with respect to the Notes: (a) The Province fails to pay any principal due on the Notes when due and payable for 10 days after the applicable payment date; or (b) The Province fails to pay any interest or Additional Amounts due on the Notes when due and payable for 30 days after the applicable payment date; or (c) The Province fails to duly perform or observe any term or obligation contained in the Notes or the Indenture, which failure continues unremedied for 60 days after written notice thereof has been given to the Province by the trustee; or (d) The Province fails to make any payment when due, after any applicable grace periods, on any of its Indebtedness (other than Excluded Indebtedness) having an aggregate principal amount greater than or equal to USD 15,000,000 (or its equivalent in other currencies); or (e) Any Indebtedness of the Province (other than Excluded Indebtedness) having an aggregate principal amount greater than or equal to USD 15,000,000 (or its equivalent in other currencies) is accelerated due to an event of default, unless the acceleration is rescinded or annulled; or (f) The Province declares a moratorium of payment of its Indebtedness (other than Excluded Indebtedness); or (g) There has been entered against the Province or a provincial agency a final judgment, decree or order by a court of competent jurisdiction from which no appeal may be or is taken for the payment of money in excess of USD 15,000,000 (or the equivalent thereof in another currency or currencies) (other than a final judgment, decree or order in respect of any Excluded Indebtedness) and 90 days shall have passed since the entry of such final judgment, decree or order without it having been satisfied or stayed; or (h) The validity of the Notes or the Indenture is contested by the Province; or (i) (A) Any constitutional provision, law, regulation, ordinance or decree necessary to enable the Province to perform its obligations under the Notes or the Indenture, or for the validity or enforceability thereof, shall expire, is withheld, revoked or terminated or otherwise ceases to remain in full force and effect, or is modified in a manner which materially adversely affects, or may reasonably be expected to materially adversely affect, any rights or claims of any of the holders of the Notes, or (B) any final decision by any court in Argentina having jurisdiction from which no appeal may be or is taken shall purport to render any material provision of the Notes or any material provision of the Indenture invalid or unenforceable or purport to prevent or delay the performance or observance by the Province of its obligations under the Notes or under the Indenture, and, in each case, such expiration, withholding, revocation, termination, cessation, invalidity, unenforceability or delay shall continue in effect for a period of 90 days. 107 If any of the events of default described above occurs and is continuing, holders of at least 25.0% of the aggregate principal amount of the Notes then outstanding may declare all of the Notes then outstanding to be immediately due and payable by giving written notice to the Province, with a copy to the trustee. If, at any time after Notes shall have been declared due and payable, the Province shall pay or shall deposit (or cause to be paid or deposited) with the trustee a sum sufficient to pay all amounts of interest and principal due upon all the Notes (with interest on overdue amounts of interest, to the extent permitted by law, and on such principal of each Note at the rate of interest specified in the Note, to the date of such payment) and such amount as shall be sufficient to cover the reasonable fees and expenses of the trustee, including, without limitation, the fees and expenses of its counsel, and if any and all events of default under the Notes, other than the non-payment of principal on the Notes which shall have become due solely by declaration of acceleration, shall have been remedied, then, and in every such case, the holders of at least 50% in principal amount of the Notes then outstanding, by written notice to the Province and to the trustee, may, on behalf of the holders of all of the Notes, waive all defaults and rescind and annul such declaration and its consequences; but no such waiver or rescission and annulment shall extend to or shall affect any subsequent default, or shall impair any right consequent on any subsequent default. As used herein, “Excluded Indebtedness” means (i) any series of Existing Bonds and (ii) any indebtedness incurred prior to the issue date of the Notes under credit facilities extended or guaranteed by member states of the OECD or any agency or instrumentality thereof. As used herein, “Existing Bonds” means (a) USD Zero Coupon Notes due 2002, (b) USD 12.50% Notes due 2002, (c) Euro 7.875% Notes due 2002, (d) Euro 9% Notes due 2002, (e) Euro 10.25% Notes due 2003, (f) USD 12.75% Notes due 2003, (g) SFr 7.75% Notes due 2003, (h) Euro 10.375% Notes due 2004, (i) Euro 9.75% Notes due 2004, (j) Euro 10% Notes due 2004, (k) Euro 10.75% Notes due 2005, (l) USD FRNs Notes due 2006, (m) USD 13.75% Notes due 2007 and (n) USD 13.25% Notes due 2010. Suits for Enforcement and Limitations on Suits by Holders If an event of default for the Notes has occurred and is continuing, the trustee may, in its discretion, institute judicial action to enforce the rights of the holders. With the exception of a suit brought by a holder on or after the stated maturity date to enforce its absolute right to receive payment of the principal of and interest on the Notes on the stated maturity date therefor (as that date may be amended or modified pursuant to the terms of the Notes, but without giving effect to any acceleration), a holder has no right to bring a suit, action or proceeding with respect to the Notes unless: (1) such holder has given written notice to the trustee that a default with respect to the Notes has occurred and is continuing; (2) holders of at least 25% of the aggregate principal amount outstanding of the Notes have instructed the trustee by specific written request to institute an action or proceeding and provided an indemnity satisfactory to the trustee; and (3) 60 days have passed since the trustee received the instruction, the trustee has failed to institute an action or proceeding as directed, and no direction inconsistent with such written request shall have been given to the trustee by a majority of holders of the Notes. Moreover, any such action commenced by a holder must be for the equal, ratable and common benefit of all holders of the Notes. Meetings, Amendments and Waivers – Collective Action The Province, in its discretion, may call a meeting of the holders of debt securities (including the Notes) at any time and from time to time regarding the debt securities or the Indenture. The Province will determine the time and place of the meeting and will notify the holders of the time, place and purpose of the meeting not fewer than 30 days and not more than 60 days prior to the date fixed for the meeting. In addition, the Province or the trustee will call a meeting of the holders of a series of debt securities if the holders of not less than 10.0% of the aggregate principal amount of such series have delivered a written request to the Province or the trustee setting out the purpose of the meeting. The Issuer shall notify the trustee, and the trustee shall notify the holders within 10 days of receipt of such written request of the time and place of the meeting, which shall take place not less than 30 and not more than 60 days after the date on which such notification is given. Only holders of debt securities and their proxies are entitled to vote at a meeting of holders. The Province will set out the procedures governing the conduct of the meeting and if additional procedures are required, the Province will consult with the trustee to establish such procedures as are customary in the market. 108 Modifications may also be approved by holders of the Notes pursuant to a written action consented to by holders of the requisite percentage of the Notes. If a proposed modification is to be approved by a written action, the Province shall solicit the consent of the relevant holders of the Notes to the proposed modification not less than 10, nor more than 30, days prior to the expiration date for the receipt of such consents specified by the Province. The holders of the outstanding Notes may generally approve any proposal by the Province to modify or take action with respect to the Indenture or the terms of the Notes with the affirmative vote (if approved at a meeting of the holders) or consent (if approved by written action) of holders of more than 50% of the outstanding principal amount of the Notes. However, holders of any series of debt securities (including the Notes) may approve, by vote or consent through one of three modification methods, any modification, amendment, supplement or waiver proposed by the Province that would do any of the following (such subjects referred to as “reserve matters”): • change the date on which any amount is payable on the debt securities; • reduce the principal amount of the debt securities (other than in accordance with the express terms of the debt securities and the Indenture); • reduce the interest rate on the debt securities; • change the method used to calculate any amount payable on the debt securities (other than in accordance with the express terms of the debt securities and the Indenture); • change the currency of any amount payable on the debt securities; • modify the Province’s obligation to make any payments on the debt securities (including any redemption price therefor); • change the identity of the obligor under the Notes; • change the definition of “outstanding” debt securities or the percentage of affirmative votes or written consents, as the case may be, required to make a “reserve matter modification”; • change the definition of “uniformly applicable” or “reserve matter modification”; • authorize the trustee, on behalf of all holders of the debt securities, to exchange or substitute all the debt securities for, or convert all the debt securities into, other obligations or securities of the Province or any other person; • change the legal ranking, governing law, submission to jurisdiction or waiver of immunities provisions of the terms of the debt securities; or • change the place of payment to the bondholders. A change to a reserve matter, including the payment terms of any series of debt securities (including the Notes), can be made without your consent, as long as the change is approved, pursuant to one of the three following modification methods, by vote or consent by: • the holders of more than 75% of the aggregate principal amount of the outstanding Notes insofar as the change affects the Notes (but does not modify the terms of any other debt securities issued under the Indenture); 109 • where such proposed modification would affect the outstanding Notes and at least one other series of debt securities issued under the Indenture, the holders of more than 75% of the aggregate principal amount of the then outstanding debt securities of all of the series affected by the proposed modification, taken in the aggregate, if certain “uniformly applicable” requirements are met (defined in the Indenture as “cross-series modification with single aggregated voting”); or • where such proposed modification would affect the outstanding Notes and at least one other series of debt securities issued under the Indenture, whether or not the “uniformly applicable” requirements are met, the holders of more than 66 2/3% of the aggregate principal amount of the then outstanding debt securities of all of the series affected by the proposed modification, taken in the aggregate, and the holders of more than 50% of the aggregate principal amount of the then outstanding debt securities of each series affected by the modification, taken individually. “Uniformly applicable,” as used herein, means a modification by which holders of debt securities of all series affected by that modification are invited to exchange, convert or substitute their debt securities on the same terms for (x) the same new instruments or other consideration or (y) new instruments or other consideration from an identical menu of instruments or other consideration. It is understood that a modification will not be considered to be uniformly applicable if each exchanging, converting or substituting holder of debt securities of any series affected by that modification is not offered the same amount of consideration per amount of principal, the same amount of consideration per amount of interest accrued but unpaid and the same amount of consideration per amount of past due interest, respectively, as that offered to each other exchanging, converting or substituting holder of debt securities of any series affected by that modification (or, where a menu of instruments or other consideration is offered, each exchanging, converting or substituting holder of debt securities of any series affected by that modification is not offered the same amount of consideration per amount of principal, the same amount of consideration per amount of interest accrued but unpaid and the same amount of consideration per amount of past due interest, respectively, as that offered to each other exchanging, converting or substituting holder of debt securities of any series affected by that modification electing the same option under such menu of instruments). Any modification consented to or approved by the holders of debt securities pursuant to the above provisions will be conclusive and binding on all holders of the relevant series of debt securities or all holders of all series of debt securities affected by a cross-series modification, as the case may be, whether or not they have given such consent, and on all future holders of those debt securities whether or not notation of such modification is made upon the debt securities. Any instrument given by or on behalf of any holder of a debt security in connection with any consent to or approval of any such modification will be conclusive and binding on all subsequent holders of that debt security. The Province may select, in its discretion, any modification method for a reserve matter modification in accordance with the Indenture and to designate which series of debt securities will be included for approval in the aggregate of modifications affecting two or more series of debt securities. Any selection of a modification method or designation of series to be included will be final for the purpose of that vote or consent solicitation. For so long as any series of debt securities issued under the indenture dated as of January 12, 2006 between the Province of Buenos Aires and The Bank of New York Mellon, as trustee (the “2006 indenture”) (“2006 debt securities”) are outstanding, if the Province certifies to the trustee and to the trustee under the 2006 indenture that a cross-series modification is being sought simultaneously with a “2006 indenture reserve matter modification”, the 2006 debt securities affected by such 2006 indenture reserve matter modification shall be treated as “series affected by that proposed modification” as that phrase is used in the Indenture; provided, that if the Province seeks a cross-series modification with single aggregated voting, in determining whether such modification will be considered uniformly applicable, the holders of any series of 2006 debt securities affected by the 2006 indenture reserve matter modification shall be deemed “holders of debt securities of all series affected by that modification,” for the purpose of the uniformly applicable definition. It is the intention that in such circumstances, the votes of the holders of the affected 2006 debt securities be counted for purposes of the voting thresholds specified in the Indenture for the applicable cross-series modification as though those 2006 debt securities had been affected by that cross-series modification although the effectiveness of any modification, as it relates to the 2006 debt securities, shall be governed exclusively by the terms and conditions of those 2006 debt securities and by the 2006 indenture; provided, however, that no such modification as to the Notes will be effective unless such modification shall have also been adopted by the holders of the 2006 debt securities pursuant to the amendment and modification provisions of such 2006 debt securities. 110 “2006 indenture reserve matter modification” means any modification to a reserve matter affecting the terms and conditions of one or more series of the 2006 debt securities, pursuant to the 2006 indenture. Before soliciting any consent or vote of any holder of the debt securities (including the Notes) for any change to a reserve matter, the Province will provide the following information to the trustee for distribution to the holders of debt securities of any series that would be affected by the proposed modification: • a description of the Province’s economic and financial circumstances that are in the Province’s opinion relevant to the request for the proposed modification, a description of the Province’s existing debts and description of its broad policy reform program and provisional macroeconomic outlook; • if the Province shall at the time have entered into an arrangement for financial assistance with multilateral and/or other major creditors or creditor groups and/or an agreement with any such creditors regarding debt relief, (x) a description of any such arrangement or agreement and (y) where permitted under the information disclosure policies of the multilateral or other creditors, as applicable, a copy of the arrangement or agreement; • a description of the Province’s proposed treatment of external debt instruments that are not affected by the proposed modification and its intentions with respect to any other major creditor groups; and • if the Province is then seeking any reserved matter modification affecting any other series of debt securities, a description of that proposed modification. For purposes of determining whether the required percentage of holders of the Notes or any series of debt securities has approved any amendment, modification or change to, or waiver of, the Notes, such other series of debt securities or the Indenture, or whether the required percentage of holders has delivered a notice of acceleration of the debt securities of that series, debt securities will be disregarded and deemed not to be outstanding and may not be counted in a vote or consent solicitation for or against a proposed modification if on the record date for the proposed modification or other action or instruction hereunder, the debt security is held by the Province or by a public sector instrumentality, or by a corporation, trust or other legal entity that is controlled by the Province or a public sector instrumentality, except that (x) debt securities held by the Province or any public sector instrumentality of the Province or by a corporation, trust or other legal entity that is controlled by the Province or a public sector instrumentality which have been pledged in good faith may be regarded as outstanding if the pledgee establishes, to the satisfaction of the trustee, the pledgee’s right so to act with respect to such debt securities and that the pledgee is not the Province, or a public sector instrumentality, or a corporation, trust or other legal entity that is controlled by the Province or a public sector instrumentality, and in case of a dispute concerning such right, the advice of counsel shall be full protection in respect of any decision made by the trustee in accordance with such advice and any certificate, statement or opinion of counsel may be based, insofar as it relates to factual matters or information which is in the possession of the trustee, upon the certificate, statement or opinion of or representations by the trustee; and (y) in determining whether the trustee will be protected in relying upon any such action or instructions hereunder, or any notice from holders, only debt securities that a responsible officer of the trustee knows to be so owned or controlled will be so disregarded. As used in the preceding paragraph, “public sector instrumentality” means any department, secretary, ministry or agency of the Province, and “control” means the power, directly or indirectly, through the ownership of voting securities or other ownership interests, by contract or otherwise, to direct the management of or elect or appoint a majority of the board of directors or other persons performing similar functions in lieu of, or in addition to, the board of directors of that legal entity. Other Amendments The Province and the trustee may, without the vote or consent of any holder of debt securities (including the Notes) of a series, amend the Indenture or the debt securities of that series for the purpose of: • adding to the Province’s covenants for the benefit of the holders; 111 • surrendering any of the Province’s rights or powers with respect to the debt securities of that series; • securing the debt securities of that series; • curing any ambiguity or curing, correcting or supplementing any defective provision in the debt securities of that series or the Indenture; • amending the debt securities of that series or the Indenture in any manner that the Province and the trustee may determine and that does not materially adversely affect the interests of any holders of the debt securities of that series; or • correcting a manifest error of a formal, minor or technical nature. Notices The Province will mail notices to holders of certificated securities at their registered addresses as reflected in the books and records of the trustee. The Province will consider any mailed notice to have been given five business days after it has been sent. The Province will give notices to the holders of a global security in accordance with the procedures and practices of the depositary and such notices shall be deemed given upon actual receipt thereof by the depositary. The Province will also publish notices to the holders (a) in a leading newspaper having general circulation in Buenos Aires, New York City and London (which is expected to be La Nación or Ambito Financiero, The Wall Street Journal and the Financial Times, respectively) and (b) if and so long as the Notes are listed on the Euro MTF Market of the Luxembourg Stock Exchange and the rules of the exchange so require, in a leading newspaper having general circulation in Luxembourg (which is expected to be Luxemburger Wort) and on the website of the Luxembourg Stock Exchange at http://www.bourse.lu. If publication in a leading newspaper in Luxembourg is not practicable, the Province will publish such notices in a leading English language daily newspaper with general circulation in Europe. The Province will consider any published notice to be given on the date of its first publication. Payment Procedure in the Event of Foreign Exchange Restrictions in Argentina The Province has agreed that, if it is unable to obtain the full amount of the specified currency or to transfer such amounts outside of Argentina in order to make a scheduled payment of principal or interest on the Notes due to a restriction or prohibition on access to the foreign exchange market in Argentina, to the extent permitted by such restriction or prohibition, the Province will pay all such amounts then due in U.S. dollars by means of (i) purchasing U.S. dollar-denominated Argentine government bonds traded outside of Argentina or any other securities or public or private bonds issued in Argentina, with Argentine Pesos, and transferring and selling such instruments outside Argentina for the specified currency or (ii) of any other legal mechanism for the acquisition of the specified currency in any foreign exchange market. All costs, including any taxes, relative to such operations to obtain the specified currency will be borne by the Province. Governing Law The Indenture is, and the Notes will be, governed by and construed in accordance with the law of the State of New York. Submission to Jurisdiction Under U.S. law, the Province is a political subdivision of a sovereign state. Consequently, it may be difficult for holders of Notes to obtain or realize judgments from courts in the United States or elsewhere against the Province. Attachment prior to judgment or attachment in aid of execution will not be ordered by courts of Argentina or the Province with respect to public property if such property is located in Argentina and is included within the provisions of Articles 234and 235 of the Argentine Civil and Commercial Code or directly provides an essential public service. Furthermore, it may be difficult for the trustee or holders to enforce, in the United States or elsewhere, the judgments of U.S. or foreign courts against the Province. 112 In connection with any legal action or proceeding arising out of or relating to the Notes (subject to the exceptions described below), the Province has agreed: • to submit to the jurisdiction of any New York State and/or U.S. federal court sitting in New York City in the Borough of Manhattan and any appellate court of either thereof; • that all claims in respect of such legal action or proceeding may be heard and determined in such New York State or U.S. federal court and the Province will waive, to the fullest extent permitted by law, any objection to venue or the defense of an inconvenient forum to the maintenance of such action or proceeding; and • to appoint Corporation Service Company as its authorized agent, which is presently located at 1133 Avenue of the Americas, Suite 3100, New York, New York, 10036, United States of America. The process agent will receive, on behalf of the Province and its property, service of copies of any summons and complaint and any other process that may be served in any such legal action or proceeding brought in such New York State or U.S. federal court sitting in New York City in the Borough of Manhattan. Service may be made by mailing or delivering a copy of such process to the Province at the address specified above for the process agent. A final non-appealable judgment in any of the above legal actions or proceedings will be conclusive and may be enforced by a suit upon such judgment in any other courts that may have jurisdiction over the Province. In addition to the foregoing, holders of Notes may serve legal process in any other manner permitted by applicable law. The above provisions do not limit the right of any holder to bring any action or proceeding against the Province or its property in other courts where jurisdiction is independently established. To the extent that the Province has or hereafter may acquire any immunity (sovereign or otherwise) in respect of its obligations under the Notes or the Indenture from jurisdiction of any court or from any legal process (whether through service of notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) with respect to itself or its property (except for property considered of the public domain or dedicated to the purpose of an essential public service under applicable Argentine and provincial law), the Province hereby irrevocably waives such immunity in respect of its obligations under the Indenture, and, without limiting the generality of the foregoing, the Province agrees that the waivers set forth in the Indenture shall have the fullest scope permitted under the Foreign Sovereign Immunities Act of 1976 of the United States, as amended, and are intended to be irrevocable for purposes of such Act. Notwithstanding the foregoing, the Province reserves the right to plead sovereign immunity under the U.S. Foreign Sovereign Immunities Act of 1976 with respect to actions or proceedings brought against it under U.S. federal securities laws or any state securities laws, and the Province’s appointment of a process agent is not intended to extend to such actions or proceedings. Holders may be required to post a bond or other security with the Argentine courts as a condition to the institution, prosecution or completion of any action or proceeding (including appeals) arising out of or relating to the Notes filed in those courts. A judgment obtained against the Province in a foreign court may be enforced in the Supreme Court of the Republic of Argentina. Based on current law, the Supreme Court of the Republic of Argentina will enforce such a judgment in accordance with the terms and conditions of the treaties entered into between Argentina and the country in which the judgment was issued. In the event there are no such treaties, the Supreme Court of the Republic of Argentina will enforce the judgment if it: • complies with all formalities required for the enforceability thereof under the laws of the country in which it was issued; • has been translated into Spanish, together with all related documents, and it satisfies the authentication requirements of the laws of Argentina; 113 • was issued by a competent court, according to Argentine principles of international law, as a consequence of a personal action (action in personam) or a real action (action in rem) over a movable property if it has been moved to Argentina during or after the time the trial was held before a foreign court; • was issued after serving due notice and giving an opportunity to the defendant to present its case; • is not subject to further appeal; • is not against Argentine public policy; and • is not incompatible with another judgment previously or simultaneously issued by an Argentine Court. Currency Indemnity The obligation of the Province to any holder under the Notes that has obtained a court judgment affecting those Notes will be discharged only to the extent that the holder may purchase U.S. dollars, referred to as the “agreement currency,” with any other currency paid to that holder in accordance with the judgment currency. If the holder cannot purchase the agreement currency in the amount originally to be paid, the Province agrees to pay the difference. The holder, however, agrees that, if the amount of the agreement currency purchased exceeds the amount originally to be paid to such holder, the holder will reimburse the excess to the Province. The holder, however, will not be obligated to make this reimbursement if the Province is in default of its obligations under the Notes. Concerning the Trustee The Indenture contains provisions relating to the obligations, rights, duties and protections of the trustee, to the indemnification of the trustee and the liability and responsibility, including limitations, for actions that the trustee takes. The trustee is entitled to enter into business transactions with the Province or any of its affiliates without accounting for any profit resulting from such transactions. Paying Agents; Transfer Agents; Registrar The Province will maintain a principal paying agent, a transfer agent and a registrar in New York City and a paying agent and a transfer agent in Western Europe (which, so long as the Notes are listed on the Euro MTF Market of the Luxembourg Stock Exchange and the rules of the Exchange so require, will be in Luxembourg). The Province will give prompt notice to all holders of Notes of any future appointment or any resignation or removal of any paying agent, transfer agent or registrar or of any change by any paying agent, transfer agent or registrar in any of its specified offices. 114 NOTICE TO INVESTORS The distribution of this offering memorandum is restricted by law in certain jurisdictions. Persons into whose possession this offering memorandum comes are required by the Province to inform themselves of and to observe any of these restrictions. This offering memorandum does not constitute, and may not be used in connection with, an offer or solicitation by anyone in any jurisdiction in which an offer or solicitation is not authorized or in which the person making an offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make an offer or solicitation. Neither the Province nor the initial purchasers accept any responsibility for any violation by any person of the restrictions applicable in any jurisdiction. The Notes will be subject to the following restrictions on transfer. Holders of Notes are advised to consult legal counsel prior to making any offer, resale, pledge or transfer of their Notes. By acquiring Notes, holders will be deemed to have made the following acknowledgements, representations to and agreements with the Province and the initial purchasers: (1) (2) (3) (4) You acknowledge that: • the Notes have not been registered under the Securities Act or the securities laws of any other jurisdiction and are being offered for resale in transactions that do not require registration under the Securities Act or the securities laws of any other jurisdiction; and • unless so registered, the Notes may not be offered or sold except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act or any other applicable securities laws, and in each case in compliance with the conditions for transfer set forth below; You represent that you are not an affiliate (as defined in Rule 144 under the Securities Act) of the Province and you are not acting on behalf of the Province and that either: • you are a QIB (as defined in Rule 144A under the Securities Act) and are acquiring the Notes for your own account or for the account of another QIB, and you are aware that the initial purchasers are selling the Notes to you in reliance on Rule 144A under the Securities Act; or • you are purchasing the Notes in an offshore transaction in accordance with Regulation S under the Securities Act; You agree on your own behalf and on behalf of any investor account for which you are purchasing Notes, and each subsequent holder of Notes by its acceptance of the Notes will agree, that the Notes may be offered, sold or otherwise transferred only: • to the Province; • inside the United States to a QIB (as defined in Rule 144A) in compliance with Rule 144A under the Securities Act; • outside the United States in compliance with Rule 903 or 904 under the Securities Act; • pursuant to a registration statement that has been declared effective under the Securities Act; or • in any other jurisdiction in compliance with local securities laws; You acknowledge that the Province and the trustee reserves the right to require, in connection with any offer, sale or other transfer of Notes, the delivery of written certifications and/or other information 115 satisfactory to the Province and the trustee as to compliance with the transfer restrictions referred to above; (5) You agree to deliver to each person to whom you transfer Notes, notice of any restrictions on transfer of such Notes; and (6) You acknowledge that each Rule 144A global note will bear a legend to the following effect: “THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY NOT BE RESOLD, PLEDGED, OR OTHERWISE TRANSFERRED EXCEPT AS PERMITTED BY THE FOLLOWING SENTENCES. THE HOLDER HEREOF, BY ITS ACCEPTANCE OF THIS NOTE, REPRESENTS, ACKNOWLEDGES AND AGREES ON ITS OWN BEHALF AND ON BEHALF OF ANY INVESTOR ACCOUNT FOR WHICH IT HAS PURCHASED SECURITIES THAT IT WILL NOT RESELL, PLEDGE OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE ISSUER, (B) IN COMPLIANCE WITH RULE 144A, UNDER THE SECURITIES ACT, TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER, (C) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE 903 OR 904 OF REGULATION S UNDER THE SECURITIES ACT OR (D) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF THE UNITED STATES OR OF ANY STATE THEREIN. THIS LEGEND MAY ONLY BE REMOVED WITH THE CONSENT OF THE ISSUER.” You acknowledge that the Province, the initial purchasers and others will rely upon the truth and accuracy of the foregoing acknowledgments, representations, warranties and agreements. You agree that if any of the acknowledgments, representations or warranties deemed to have been made by your purchase of Notes is no longer accurate, you shall promptly notify the Province and the initial purchasers. If you are acquiring any Notes as a fiduciary or agent for one or more investor accounts, you represent that you have sole investment discretion with respect to each of those accounts and that you have full power to make the foregoing acknowledgments, representations, warranties and agreements on behalf of each account. Notice to Prospective Investors in Canada The notes may be sold only to purchasers purchasing or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the notes must be in made accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws. Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus supplement (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s providence or territory for particulars of these rights or consult with a legal advisor. Pursuant to section 3A.3 of National Instrument 33-105 Underwriting Conflicts (“NI33-105”), the underwriters are not required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this offering. Notice to Prospective Investors in the European Economic Area In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a “Relevant Member State”), the Initial Purchasers and the Co-Managers have represented and agreed that with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member 116 State (the “Relevant Implementation Date”) it has not made and will not make an offer to the public of any Notes which are the subject of the offering contemplated by this offering memorandum as completed by the final terms in relation thereto to the public in that Relevant Member State (the “Securities”) except that it may, with effect from and including the Relevant Implementation Date, make an offer of such Securities to the public in that Relevant Member State: • to any legal entity which is a qualified investor as defined in the Prospectus Directive; • to fewer than 150 natural or legal persons (other than qualified investors as defined in the Prospectus Directive), as permitted under the Prospectus Directive, subject to obtaining the prior consent of the relevant dealer or dealers nominated by us for any such offer; or • in any other circumstances falling within Article 3(2) of the Prospectus Directive; provided that no such offer of Securities shall require us, the Initial Purchasers nor the Co-Managers, to publish a prospectus pursuant to Article 3 of the Prospectus Directive or a supplemental prospectus pursuant to Article 16 of the Prospectus Directive. For the purposes of this provision, the expression “an offer to the public” in relation to any Securities in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the Securities to be offered so as to enable an investor to decide to purchase or subscribe the Securities, as the same may be varied in that Relevant Member State by any measure implementing the Prospectus Directive in that Relevant Member State and, the expression “Prospectus Directive” means Directive 2003/71/EC (as amended, including by Directive 2010/73/EU), and includes any relevant implementing measure in each Relevant Member State. The European Economic Area selling restriction is in addition to any other selling restrictions included in this offering memorandum. Notice to Prospective Investors in Hong Kong This offering memorandum has not been approved by or registered with the Securities and Futures Commission of Hong Kong or the Registrar of Companies of Hong Kong. The Notes will not be offered or sold in Hong Kong other than (a) to “professional investors” as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made under that Ordinance; or (b) in other circumstances which do not result in the document being a “prospectus” as defined in the Companies Ordinance (Cap. 32) of Hong Kong or which do not constitute an offer to the public within the meaning of that Ordinance. No advertisement, invitation or document relating to the bonds which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) has been issued or will be issued in Hong Kong or elsewhere other than with respect to securities which are or are intended to be disposed of only to persons outside of Hong Kong or only to “professional investors” as defined in the Securities and Futures Ordinance and any rules made under that Ordinance. Notice to Prospective Investors in Singapore This offering memorandum has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offering may not be circulated or distributed, nor may the Notes be offered, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act (Chapter 289) (the “SFA”), (ii) to a relevant person, or any person pursuant to Section 275(1A), and in accordance with the conditions specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA. Where the Notes are subscribed for under Section 275 by a relevant person which is: (a) a corporation (which is not an accredited investor) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or (b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary is an accredited investor, then securities, debentures and units of securities and debentures of that corporation or the beneficiaries’ rights and interest in that trust shall not be transferable for six months after that corporation or that trust has acquired the Notes under Section 275 except: (i) to an institutional 117 investor under Section 274 of the SFA or to a relevant person, or any person pursuant to Section 275(1A), and in accordance with the conditions specified in Section 275 of the SFA; (ii) where no consideration is given for the transfer; or (iii) by operation of law. Notice to Prospective Investors in the United Kingdom This offering memorandum is for distribution only to persons who (i) have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended, the “Financial Promotion Order”), (ii) are persons falling within Article 49(2)(a) to (d) (“high net worth companies, unincorporated associations etc.”) of the Financial Promotion Order, or (iii) are outside the United Kingdom (all such persons together being referred to as “relevant persons”). This offering memorandum is directed only at relevant persons and must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this offering memorandum relates is available only to relevant persons and will be engaged in only with relevant persons. Each Initial Purchaser has represented and agreed, and each further Initial Purchaser appointed hereunder will be required to represent and agree, that: (a) it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the FSMA) received by it in connection with the issue or sale of any Notes in circumstances in which Section 21(1) of the FSMA does not apply to the Province; and (b) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to any Notes in, from or otherwise involving the United Kingdom. 118 TAXATION The following discussion summarizes certain Argentine, provincial, and U.S. federal income tax considerations that may be relevant to you if you purchase own or sell the Notes. This summary is based on laws, regulations, rulings and decisions now in effect in each of these jurisdictions, including any relevant tax treaties. Any change could apply retroactively and could affect the continued validity of this summary. This summary does not describe all of the tax considerations that may be relevant to you or your situation, particularly if you are subject to special tax rules. You should consult your tax advisor about the tax consequences of the acquisition, ownership and disposition of the Notes, including the relevance to your particular situation of the considerations discussed below, as well as of any foreign, state, local or other tax laws. The following discussion does not address tax consequences applicable to holders of the Notes in particular jurisdictions that may be relevant to such holder. Holders of the Notes are urged to consult their own tax advisors as to the overall tax consequences of the acquisition, ownership and disposition of the Notes in relevant jurisdictions. Argentine Tax Consequences General The following is a general summary of certain Argentine tax consequences resulting from the beneficial ownership of the Notes by certain holders. While this description is considered to be a correct interpretation of Argentine laws and regulations in force as of the date of this offering memorandum, no assurance can be given that the courts or fiscal authorities responsible for the administration of such laws will agree with this interpretation or that changes to such laws will not occur, which may also have retroactive effects. Income Tax Interest Unless otherwise stated hereinafter, interest on the Notes will be exempt from Argentine Income Tax (IT) according to article 36 bis of Law 23,576, the Negotiable Obligations Law. Decree No. 1076/92, as amended by Decree No. 1157/92, ratified by Law No. 24,307 (the Decree), however, eliminated the above exemption for holders who are subject to Title VI of the Argentine Income Tax Act (in general, entities organized or incorporated under Argentine law, Argentine branches of foreign entities, sole proprietorships and individuals who conduct certain business in Argentina (hereinafter referred to as the Argentine Entities)). Consequently, interest paid to Argentine Entities is subject to the IT as provided for by applicable Argentine tax law and regulations. In the event of any withholding or deduction of any Relevant Taxes by a Relevant Jurisdiction, the Province has undertaken to make payments of additional amounts, subject to certain limitations, as will result in receipt by the Holders of the amounts that would otherwise have been receivable by them in respect of payments of such Notes in the absence of such withholdings or deduction. See “Description of the Notes—Additional Amounts.” Capital Gains According to Article 36 bis of the Negotiable Obligations Law, individuals, either resident in Argentina or not, and foreign entities without a permanent establishment in Argentina, will not be subject to the payment of IT on income derived from the sale, change, conversion or other disposition of the Notes provided that the Notes are placed through a public offering. The Province expects that the issuance of the Notes will satisfy the conditions of Article 36 of the Negotiable Obligations Law. Argentine law provides generally that tax exemptions do not apply when, as a result of the application of an exemption, revenue that would have been collected by the Argentine tax authority would be collected instead by a 119 foreign tax authority (Articles 21 of the Income Tax Law and 106 of the Tax Proceedings Law). This principle, however, does not apply to holders who are foreign beneficiaries. Argentine Entities are subject to the payment of IT at a rate of 35.0% on income derived from the sale, change, conversion or other disposition of the Notes. In the event of the imposition over local and foreign individuals or foreign entities of any deduction or withholding for or on account of Income Tax, the Province has undertaken to make payments of additional amounts, subject to certain limitations, as will result in receipt by the Holders of the amounts that would otherwise have been receivable by them in respect of payments of such Notes in the absence of such withholdings or deduction. See “Description of the Notes—Additional Amounts.” Value Added Tax (VAT) Any financial transaction and operation related to the issuance, placement, purchase, transfer, payment of principal and/or interest or redemption of the Notes will be exempt from VAT provided that the conditions of Section 36 of the Negotiable Obligations Law are fulfilled. The Province expects that the issuance of the Notes will satisfy the conditions of Section 36 of the Negotiable Obligations Law. Personal Assets Tax Under Law No. 23,966 regarding personal assets tax (PAT), individuals and undivided estates (regardless of their domicile and location) are subject to personal assets tax on their holdings at December 31 of each year. However, individuals and undivided estates (regardless of their domicile and location) are exempt from PAT on their holdings of any bond or security issued either by the Argentine federal government, an Argentine Province or a Municipality, such as the Notes. In certain cases, assets held by companies or other entities domiciled or settled abroad (offshore entities) are presumed to be owned by individuals or undivided estates domiciled or settled in Argentina and, consequently, are subject to the PAT. However, this presumption is not applicable when the assets are Notes or securities issued either by the Argentine federal government, an Argentine Province or a Municipality. Presumed Minimum Income Tax The tax on presumed minimum income (the PMIT) is levied on the potential income from the ownership of certain income-generating assets. Corporations domiciled in Argentina as well as the branches and permanent establishments in Argentina of companies or other entities incorporated abroad, among others, are subject to the tax at the rate of 1.0% (0.2% in the case of financial entities subject to Law No. 21,526, leasing entities, insurance entities) if the value of their assets exceeds ARS 200,000 at the end of a given economic period. If the value of the assets exceeds ARS 200,000, the total assets of the entity that are subject to taxation shall be taxable. This tax will only be paid if the IT determined for any fiscal year does not equal or exceed the amount owed under the PMIT. On the other hand, if the PMIT exceeds the IT owed in the same fiscal year, only the difference shall be paid as PMIT. Any PMIT paid will be applied as a credit toward IT owed in the immediately following ten fiscal years. The taxable value of the Notes will be determined: (i) on the basis of the latest quotation at the closing dates of the relevant fiscal years if the Notes are listed on stock exchanges or public markets; and (ii) on their cost, increased, if relevant, by the amount of interest and exchange differences accrued at the closing date of the fiscal year, if the Notes are unlisted. 120 Tax on Debits and Credits on Bank Accounts Law No. 25,413, as amended and regulated, establishes, with certain exceptions, a tax levied on debits from and credits to bank accounts maintained at financial institutions located in Argentina and on other transactions that are used as a substitute for the use of bank checking accounts. The general tax rate is 0.6% for each debit and credit; however increased tax rates of 1.2% and reduced rates of 0.075% may apply in certain cases. To the extent that holders of the Notes receive payments by utilizing local bank checking accounts, such tax may apply. Pursuant to Decree No. 534/00 (published in the Official Gazette on May 3, 2004), 34% of the tax paid on credits levied with the 0.6% tax rate and 17% of the tax paid on transactions levied with the 1.2% tax rate will be considered as a payment on account of IT and PMIT. Any unutilized portion of such 34% or 17%, as applicable, can be carried-forward to subsequent fiscal periods. Debits and credits in banking accounts in accordance with Communication “A” 3250 of the Central Bank used by foreign entities for financial investments in Argentina are exempt from this tax. Transfer Taxes No Argentine transfer taxes are applicable to the sale and transfer of the Notes. Court Tax In the event that it becomes necessary to institute enforcement proceedings in relation with the Notes (i) in the federal courts of Argentina or the courts sitting in the City of Buenos Aires, a court tax (currently at a rate of 3.0%) will be imposed on the amount of any claim brought before such courts; or (ii) in the courts of the Province, certain court (currently assesed at 2.2%) and other taxes will be imposed on the amount of any claim brought before such courts. Provincial Tax Consequences The Notes as well as the income derived therefrom are exempt from all taxes imposed by the Province, including stamp tax and gross income tax. The Province establishes a tax on gratuitous transfer of properties, which may apply if the beneficiaries are domiciled in the Province or if the assets being distributed, such as the Notes, are located therein. The tax is levied on any increase in assets that results from a gratuitous title transfer, including inheritances, legacies and gifts. Any gratuitous transfer of property lower than or equal to ARS 78,000 is exempt. This amount is increased to ARS 325,000 in the case of transfers among parents, sons, daughters and spouses. The amount to be taxed, which includes a fixed component and a variable component that is based on differential rates (which range from 4% to 21.9%), varies according to the property value to be transferred and the degree of kinship of the parties involved. In the event of the imposition of any deduction or withholding for or on account of any taxes, duties, assessments or other governmental charges on the payment by the Province in respect of the Notes, the Province has undertaken to make payments of additional amounts, subject to certain limitations, as will result in receipt by the holders of the amounts that would otherwise have been receivable by them in respect of payments of such Notes in the absence of such withholdings or deduction. See “Description of the Notes – Additional Amounts.” The Province of Entre Ríos, by virtue of Law No. 10,197 (published in the Official Gazette on January 24, 2013), implemented this tax on a provincial level that may apply if the beneficiaries are domiciled in Entre Rios or if the transferred assets are located within said jurisdiction. The taxable event and the applicable rates are similar to the ones described for the Province of Buenos Aires. Pursuant to Decree 2554/2014 (published in the Official Gazette of Entre Rios dated October 24, 2014) the gratuitous transfer of assets shall not pay the TGTA if the aggregate value is equal or less than Ps. 60,000, or Ps. 250,000 if the transfer were done between parents, sons or spouses. Prospective investors in Argentina should consider the tax consequences of the Argentine province in which they are located. 121 U.S. Federal Income Tax Consequences The following summary contains a description of certain U.S. federal income tax consequences of the purchase, ownership and disposition of the Notes by a “United States person.” As used herein, the term “United States person” means an individual who is a citizen or resident of the United States, a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia, an estate the income of which is subject to U.S. federal income taxation regardless of its source or a trust if (i) a U.S. court is able to exercise primary supervision over the trust’s administration and (ii) one or more United States persons have the authority to control all of the trust’s substantial decisions, and the term “United States” means only the United States of America (including the states thereof and the District of Columbia). This summary only addresses initial purchasers of the Notes that purchase the Notes at their initial offering price and hold the Notes as capital assets. It does not address considerations that may be relevant to you if you are an investor that is subject to special tax rules, such as a bank, thrift, real estate investment trust, regulated investment company, insurance company, dealer in securities or currencies, trader in securities or commodities that elects “mark-to-market” treatment, investor that will hold the Notes as a hedge against currency risk or as a position in a “straddle” or conversion transaction, partnership (and partners therein) or other entity or arrangement treated as a partnership for U.S. federal income tax purposes, person subject to the U.S. federal alternative minimum tax, tax-exempt organization or a United States person (as defined above) whose “functional currency” is not the U.S. dollar. In addition, this summary does not address the alternative minimum tax, the Medicare tax on net investment income or other aspects of U.S. federal income or state and local taxation, or any tax consequences arising out of the laws of any non-U.S. jurisdiction that may be relevant to a United States person. The following discussion assumes that the Notes will not be issued with more than a de minimis amount of original issue discount (OID). If the issue price of a Note is less than its stated redemption price at maturity (generally, its principal amount) by more than a de minimis amount, United States persons will be subject to special U.S. federal income tax rules with respect to this OID. In respect of the 2019 Notes, OID will be considered de minimis if it is less than 0.25% of the stated redemption price at maturity multiplied by the number of complete years to maturity of the 2019 Notes. If the 2019 Notes are issued with more than a de minimis amount of OID, holders will be required to include such OID in income for U.S. federal tax purposes as it accrues in accordance with a constant yield method based on a compounding of interest, even though the cash attributable to this income will not be received until a 2019 Note is sold, exchanged, redeemed or otherwise disposed. In respect of the 2027 Notes, OID will be considered de minimis if it is less than 0.25% of the stated redemption price at maturity multiplied by the “weighted average maturity” of the 2027 Notes. The “weighted average maturity” of a 2027 Note is the sum of the following amounts, determined for each installment of principal paid: (i) the number of complete years from the issue date until such principal payment is made, multiplied by (ii) a fraction equal to the amount of such principal payment divided by the 2027 Note’s stated redemption price at maturity. Holders of 2027 Notes with de minimis original issue discount generally will include the amount of original issue discount on the 2027 Notes in income, as capital gains, on a pro rata basis as principal payments are made on the 2027 Notes. If the 2027 Notes are issued with more than a de minimis amount of OID, holders will be required to include such OID in income for U.S. federal income tax purposes as it accrues in accordance with a constant yield method based on a compounding of interest, even though the cash attributable to this income will not be received until a 2027 Note is sold, exchanged, redeemed or otherwise disposed. Payments of Interest If you are a United States person, the interest you receive on the Notes will generally be subject to U.S. federal income taxation and will be considered ordinary interest income on which you will be taxed in accordance with the method of accounting that you generally use for tax purposes. A United States person will also be required to include in gross income as interest any withholding tax paid (if any) and additional amounts paid (if any) with respect to withholding tax on the Notes (as described under “Description of the Notes—Additional Amounts”), including foreign withholding tax on payments of such additional amounts. 122 Interest received or accrued on the Notes will constitute foreign source “passive category income” to most United States persons for U.S. foreign tax credit purposes. If Argentine or other foreign withholding taxes are imposed, United States persons will be treated as having actually received an amount equal to the amount of such taxes and as having paid such amount to the relevant taxing authority. As a result, the amount of interest income included in gross income by a United States person would be greater than the amount of cash actually received by the United States person in such instance. A United States person may be able, subject to certain generally applicable limitations, to claim a foreign tax credit (or, alternatively, a deduction if the United States person has elected to deduct all foreign income taxes for that taxable year) for foreign withholding taxes imposed on payments of interest (including any additional amounts, as described under “Description of the Notes— Additional Amounts”). The calculation of U.S. foreign tax credits and, in the case of a United States person that elects to deduct foreign income taxes, the availability of deductions involves the application of complex rules that depend on a United States person’s particular circumstances. United States persons should, therefore, consult their own tax advisors regarding the application of the U.S. foreign tax credit rules to interest income (including additional amounts) on the Notes. Disposition of Notes When the Notes are sold, redeemed, retired or otherwise disposed, you generally will recognize gain or loss equal to the difference between an amount you realize on the transaction and your adjusted tax basis in the Notes (except that any amount attributable to accrued and unpaid interest will be treated as a payment of interest for U.S. federal income tax purposes). Your adjusted tax basis in a Note generally will equal the cost of the Note to you, increased by any amounts that you are required to include in income under the rules governing de minimis original issue discount, and reduced by payments of principal previously received in respect of such Note (if any). If you are a United States person who is an individual, estate or trust and the Note being sold, exchanged or otherwise disposed of is a capital asset held by you for more than one year, you may be eligible for reduced rates of taxation on any capital gain realized. Your ability to deduct capital losses is subject to limitations. Gain or loss recognized by you on the sale, redemption, retirement or other taxable disposition of a Note generally will be U.S. source gain or loss. Accordingly, if Argentine or other withholding tax is imposed on the sale or disposition of the Notes, you may not be able to fully utilize your U.S. foreign tax credits in respect of such withholding tax unless you have other foreign source income. Prospective investors should consult their own tax advisors as to the U.S. and foreign tax credit implications of such sale, redemption, retirement or other taxable disposition of a Note. Information Reporting and Backup Withholding The paying agents will be required to file information returns with the U.S. Internal Revenue Service with respect to payments made to certain United States persons on the Notes. In addition, certain United States persons may be subject to U.S. backup withholding tax in respect of such payments if they do not provide their taxpayer identification numbers to the relevant paying agent, and may also be subject to information reporting and backup withholding requirements with respect to proceeds from a sale of the Notes. Any amounts withheld under the backup withholding tax rules will be allowed as a refund or credit against your U.S. federal income tax liability, provided that you timely furnish the required information to the U.S. Internal Revenue Service. Individual U.S. persons that own “specified foreign financial assets” with an aggregate value in excess of USD 50,000 are generally required to file an information statement along with their tax returns, currently on Form 8938, with respect to such assets. “Specified foreign financial assets” include any financial accounts held at a non-U.S. financial institution, as well as securities issued by a non-U.S. issuer (which would include the Notes) that are not held in accounts maintained by financial institutions. Higher reporting thresholds apply to certain individuals living abroad and to certain married individuals. Regulations extend this reporting requirement to certain entities that are treated as formed or availed of to hold direct or indirect interests in specified foreign financial assets based on certain objective criteria. U.S. persons who fail to report the required information could be subject to substantial penalties. Prospective investors should consult their own tax advisors concerning the application of these rules to their investment in the Notes, including the application of the rules to their particular circumstances. 123 The Proposed European Financial Transaction Tax The European Commission has published a proposal (the “Commission’s Proposal”) for a Directive for a common financial transaction tax (“FTT”) in Belgium, Germany, Estonia, Greece, Spain, France, Italy, Austria, Portugal, Slovenia and Slovakia (the “participating Member States”). However, Estonia has since stated that it will not participate. The Commission’s Proposal has very broad scope and could, if introduced in its current form, apply to certain dealings in Notes in certain circumstances. Under the Commission’s Proposal, the FTT could apply in certain circumstances to persons both within and outside of the participating Member States. Generally, it would apply to certain dealings in Notes where at least one party is a financial institution, and at least one party is established in a participating Member State. A financial institution may be, or be deemed to be, “established” in a participating Member State in a broad range of circumstances, including (a) by transacting with a person established in a participating Member State or (b) where the financial instrument which is subject to the dealings is issued in a participating Member State. The FTT remains subject to negotiation between the participating Member States and the legality of the proposal is uncertain. It may therefore be altered prior to any implementation, the timing of which remains unclear. Additional EU Member States may decide to participate and/ or certain of the participating Member States may decide to withdraw. Prospective holders of Notes are advised to seek their own professional advice in relation to the FTT. 124 PLAN OF DISTRIBUTION The Province intends to offer the Notes to the initial purchasers Citicorp Capital Markets S.A., HSBC Bank Argentina S.A. and Santander Río Valores S.A. Banco Provincia is acting as local co-manager, not as an initial purchaser. Banco Provincia may receive the Notes from the initial purchasers and they may take such action with respect to the Notes as permitted herein. Subject to the terms and conditions contained in a contrato de suscripción (the “purchase agreement”) between the Province and the initial purchasers, the Province has agreed to sell to the initial purchasers and the initial purchasers have agreed to severally purchase from the Province the principal amount of the Notes set forth below. Affiliates of Citicorp Capital Markets S.A., HSBC Bank Argentina S.A. and Santander Río Valores S.A., may distribute the Notes outside of Argentina, however affiliates of Banco Provincia may not distribute Notes outside of Argentina. Initial Purchasers Citicorp Capital Markets S.A. .......................................................... HSBC Bank Argentina S.A. ............................................................. Santander Río Valores S.A. ............................................................. Total ................................................................................................ Principal Amount of 2019 Notes USD 166,667,000 166,667,000 166,666,000 USD 500,000,000 Principal Amount of 2027 Notes USD 166,667,000 166,666,000 166,667,000 USD 500,000,000 The initial purchasers have agreed to purchase all of the Notes being sold pursuant to the purchase agreement if any of these Notes are purchased. The initial purchasers have advised the Province that they propose initially to offer the Notes at the price listed on the cover page of this offering memorandum. The Province has agreed to indemnify the initial purchasers and their affiliates against certain liabilities, including liabilities under the Securities Act, or to contribute to payments the initial purchasers may be required to make in respect of those liabilities. The initial purchasers are offering the Notes, subject to prior sale, when, as and if issued to and accepted by them, subject to approval of legal matters by their counsel, including the validity of the Notes, and other conditions contained in the purchase agreement, such as the receipt by the initial purchasers of officer’s certificates and legal opinions. The initial purchasers reserve the right to withdraw, cancel or modify offers to investors and to reject orders in whole or in part. The Province expects that delivery of the Notes will be made against payment for the Notes on June 15, 2016, which will be the fifth business day following the date of the pricing of the Notes. Under Rule 15c6-1 of the Exchange Act, trades in the secondary market are generally required to settle in three business days unless the parties to any such trade expressly agree otherwise. Accordingly, purchasers who wish to trade the Notes on the date of pricing or on the next succeeding business days will be required to specify an alternate settlement cycle at the time of any such trade to prevent failed settlement. Purchasers of the Notes who wish to trade the Notes on the date of this offering memorandum or the next succeeding business days should consult their own advisors. Notes Are Not Being Registered The initial purchasers propose to offer the Notes for resale in transactions not requiring registration under the Securities Act or applicable state securities laws, including sales pursuant to Rule 144A. The initial purchasers will not offer or sell the Notes except: • to persons they reasonably believes to be QIB, or • pursuant to offers and sales to non-U.S. persons that occur outside the United States within the meaning of Regulation S. Notes sold pursuant to Regulation S may not be offered or resold in the United States or to U.S. persons (as defined in Regulation S), except under an exemption from the registration requirements of the Securities Act or under a registration statement declared effective under the Securities Act. 125 Each purchaser of the Notes will be deemed to have made acknowledgments, representations and agreements as described under “Notice to Investors.” The initial purchasers will represent, warrant and undertake in the purchase agreement that: • they have only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Market Act 2000 of the United Kingdom) in connection with the issue or sale of the Notes in circumstances in which Section 21(1) of Financial Services and Market Act 2000 of the United Kingdom does not apply to the Province, and • they have complied and will comply with all applicable provisions of the Financial Services and Market Act 2000 of the United Kingdom with respect to anything done by it in relation to any Notes in, from or otherwise involving the United Kingdom. New Issue of Notes The Notes are a new issue of securities. The initial purchasers have advised the Province that they or their affiliates presently may make a market in the Notes after completion of this offering. However, they are under no obligation to do so and may discontinue any market-making activities at any time without any notice. The Notes are expected to be admitted to trading on the Euro MTF Market of the Luxembourg Stock Exchange, and listed on the MERVAL and the MAE. However, that does not ensure that a liquid or active public trading market for the Notes will develop. If an active trading market for the Notes does not develop, the market price and liquidity of the Notes may be adversely affected. If the Notes are traded, they may trade at a discount from their initial offering price, depending on prevailing interest rates, the market for similar securities, the Province’s performance and other factors. Price Stabilization and Short Positions In connection with the offering, the initial purchasers may engage in transactions that stabilize the market price of the Notes. Such transactions consist of bids or purchases to peg, fix or maintain the price of the Notes. If the initial purchasers create a short position in the Notes in connection with the offering, i.e., if they sell more Notes than are listed on the cover page of this offering memorandum, the initial purchasers may reduce that short position by purchasing Notes in the open market. Purchases of a security to stabilize the price or to reduce a short position may cause the price of the security to be higher than it might be in the absence of such purchases. Neither the Province nor the initial purchasers makes any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of the Notes. In addition, neither the Province nor the initial purchasers makes any representation that the initial purchasers will engage in these transactions or that these transactions, once commenced, will not be discontinued without notice. Other Relationships The initial purchasers and their respective affiliates are full service financial institutions engaged in various activities, which may include sales and trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, market making, brokerage and other financial and non-financial activities and services. The initial purchasers and their affiliates have engaged in, and may in the future engage in, investment banking, commercial banking and other financial services and commercial dealings in the ordinary course of business with the Province. They have received and will receive customary fees and commissions for these transactions. In addition, in the ordinary course of their business activities, the initial purchasers and their affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers. Such investments and securities activities may involve securities and/or instruments of the Province or the Province’s 126 affiliates. If any of the initial purchasers or their affiliates have a lending relationship with the Province, certain of those initial purchasers or their affiliates routinely hedge, and certain other of those initial purchasers may hedge, their credit exposure to the Province consistent with their customary risk management policies. Typically, these initial purchasers and their affiliates would hedge such exposure by entering into transactions which consist of either the purchase of credit default swaps or the creation of short positions in the Province’s securities, including potentially the Notes offered hereby. Any such credit default swaps or short positions could adversely affect future trading prices of the Notes offered hereby. The initial purchasers and their affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or financial instruments and may hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments. 127 OFFICIAL STATEMENTS Information in this offering memorandum that is identified as being derived from a publication of Argentina, the Province or one of their respective agencies or instrumentalities relies on the authority of such publication as a public official document of Argentina or the Province, as the case may be. The Province has not independently verified the information in this offering memorandum that is identified as being derived from a publication of Argentina and makes no representation as to its accuracy or completeness. All other information and statements set forth herein relating to the Province are included as public official statements made on the authority of the Province. VALIDITY OF THE NOTES The validity of the Notes will be passed upon for the Province by Cleary Gottlieb Steen & Hamilton LLP, United States counsel to the Province and by the Asesor General del Gobierno (General Legal Advisor to the Executive Branch) of the Province; and for the initial purchasers by Shearman & Sterling LLP, United States counsel to the initial purchasers, and Bruchou, Fernández Madero & Lombardi, Argentine counsel to the initial purchasers. As to all matters of Argentine and provincial law, Cleary Gottlieb Steen & Hamilton LLP may rely on the opinion of the Asesor General del Gobierno (General Legal Advisor to the Executive Branch) of the Province, and Shearman & Sterling LLP may rely upon the opinion of Bruchou, Fernández Madero & Lombardi. As to all matters of United States law, the Asesor General del Gobierno (General Legal Advisor to the Executive Branch) of the Province may rely on the opinion of Cleary Gottlieb Steen & Hamilton LLP, and Bruchou, Fernández Madero & Lombardi may rely on the opinion of Shearman & Sterling LLP. GENERAL INFORMATION The Province The Province has authorized the creation and issue of the Notes pursuant to the 2016 Budget Law, Decree No. 122/16 dated March 2, 2016 and Resolution of the Ministry of Economy of the Province No. 87/16 dated June 8, 2016. Except as disclosed in this offering memorandum, since March 31, 2016 (the end of the most recent fiscal period for which financial statements have been prepared) there has been no material adverse change in the revenues or expenditures, or financial position, of the Province. Listing and Listing Agent Application will be made to list the Notes on the Luxembourg Stock Exchange and for the Notes to trade on the Euro MTF Market of the Luxembourg Stock Exchange. Application will be made to list the Notes on the MERVAL and on the MAE. The Luxembourg listing agent is Société General Bank & Trust. Documents Relating to the Notes Copies of the Trust Indenture, this offering memorandum and the forms of the Notes may be inspected free of charge during normal business hours on any day, except Saturdays, Sundays and public holidays in Luxembourg, at the offices of the listing agent in Luxembourg, as long as the Notes are listed on the Luxembourg Stock Exchange. Copies of this offering memorandum may be obtained during normal business hours on any day except Saturdays, Sundays and public holidays, at the offices of the listing agent in Luxembourg, as long as the Notes are listed on the Luxembourg Stock Exchange. Notices For so long as any of the Notes are listed on the Luxembourg Stock Exchange and the rules of the Luxembourg Stock Exchange shall so require, all notices to holders of such series shall be published either in a newspaper with general circulation in Luxembourg (which is expected to be the Luxemburger Wort or the Tageblatt) or on the website of the Luxembourg Stock Exchange (www.bourse.lu) or otherwise in compliance with the relevant listing rules of the Luxembourg Stock Exchange. 128 Clearing The Notes have been accepted for clearance through the Euroclear and Clearstream clearance systems. The relevant trading information is set forth in the following table: 2019 Notes Rule 144A ......................................... Regulation S ..................................... ISIN Number XS1433314157 XS1433314231 Common Code 143331415 143331423 2027 Notes Rule 144A ......................................... Regulation S ..................................... ISIN Number XS1433314587 XS1433314314 Common Code 143331458 143331431 129 ISSUER The Government of the Province of Buenos Aires Calle 8 entre 45 y 46, P.B. Of.14 La Plata, Buenos Aires 1900 TRUSTEE, PRINCIPAL PAYING AGENT, TRANSFER AGENT AND REGISTRAR U.S. Bank National Association 100 Wall Street, Suite 1600, New York, NY 10005 Attention: Global Corporate Trust LUXEMBOURG LISTING AGENT, PAYING AGENT AND TRANSFER AGENT Société General Bank & Trust 11 avenue Emile Reuter L-2420 Luxembourg Attention: Issuer services LEGAL ADVISORS To the Province As to U.S. federal and New York law: Cleary Gottlieb Steen & Hamilton LLP One Liberty Plaza New York, NY 10006 As to Argentine law: Asesor General del Gobierno de la Provincia de Buenos Aires Calle 9 No. 1177 entre 56 y 57 La Plata, Buenos Aires 1900 Argentina Cabanellas Etchebarne Kelly Av. Eduardo Madero 900, Piso 16 C1106ACV Buenos Aires Argentina To the Initial Purchasers As to U.S. federal and New York law: As to Argentine law: Shearman & Sterling LLP 599 Lexington Avenue New York, NY 10022 Bruchou, Fernández Madero & Lombardi Ing. Enrique Butty 275 C1001AFA Buenos Aires Argentina The Province of Buenos Aires (A Province of Argentina) USD 500,000,000 5.750% Notes Due 2019 USD 500,000,000 7.875% Notes Due 2027 OFFERING MEMORANDUM Joint Bookrunners Citigroup HSBC Santander Local Co-Manager Banco de la Provincia de Buenos Aires June 8, 2016
